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Week in Review

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04/23/2016

For the week 4/18-4/22

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant costs.  Your help is appreciated.  Click on the gofundme link above or you can send a check to PO Box 990, New Providence, NJ  07974.

Edition 889

Washington and Wall Street

Next week we have a key Fed Open Market Committee meeting.  Not that the Fed is going to hike the benchmark funds rate again...it isn’t...but the accompanying statement will be parsed anew for signs of a June hike.  That said it will still depend on the May/June data leading up to that particular confab, plus any concern in euroland with Greece and the referendum on Brexit.  Also, don’t discount the impact of the June 7 Republican primary results, which will tell you whether Donald Trump has received the 1,237 he needs for the nomination or if we’re headed to a brokered convention, and the uncertainty on Wall Street and in the Fed that would engender.

There was some data on the housing front.  March housing starts were far less than expected, down 8.8%, but existing home sales rose a solid 5.1% month over month to an annualized rate of 5.33 million, better than expected.

Jobless claims for the week ended April 16 also came in at their lowest level since the 1970s, something the Fed will weigh.

This week was all about earnings and I cover individual companies below.  The tech earnings have been less than impressive thus far, while some of the industrials had slightly optimistic statements and the consumer sector was so-so at best.  All in all, kind of bleh. 

Here’s the deal.  The market is in no way cheap (24 p/e for the S&P on trailing earnings), even with zero interest rates.  But it did help some that oil prices didn’t collapse and instead rallied following the Doha weekend meeting with oil producers that I cover below.

So the Dow on Monday closed above 18000 for the first time since last July before finishing the week at 18003.  [The all-time high is 18312.]

Europe and Asia

Markit released its flash readings for April on services and manufacturing in the eurozone and the manufacturing PMI was 51.5 vs. 51.6 in March (50 being the dividing line between growth and contraction). Services were a tick better at 53.2 vs. 53.1.

The flash readings in Germany were 51.9 on the manufacturing side vs. 50.7 last month, with the services reading at 54.6, down from 55.1

In France the services PMI was 50.8 vs. 49.9, while manufacturing fell to a putrid 48.3 vs. 49.6.

Chris Williamson, Chief Economist at Markit:

“A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.

“The eurozone economy remains stuck in a slow growth rut in April, with the PMI once again signaling GDP growth of just 0.3% at the start of the second quarter, broadly in line with the meager pace of expansion seen now for a full year.

“Even more aggressive policy action may therefore be required to drive a more robust and sustainable recovery and reignite inflationary pressures.”

Related to Mr. Williamson’s statement, European Central Bank President Mario Draghi called for critics of the European Central Bank to give its stimulus room to work.

“Any time the credibility of a central bank is perceived as being put into question, the result is a delay in the achievement of its objectives – and therefore the need for more expansion,” an irritated Draghi told reporters in Frankfurt.  “Our policies work, they are effective.  Just give them time.”

The ECB’s Governing Council left the benchmark interest rate at zero this week and the deposit rate at minus 0.4 percent, while maintaining its asset purchase program at 80bn euros a month ($90 billion).  Going to a negative deposit rate as well as expanded quantitative easing was part of the ECB’s March 10 meeting.

But as Draghi has learned, not everyone believes in his policies.  German Finance Minister Wolfgang Schauble has been harsh in his criticism of the ECB, pointing to a policy that burdens savers and destroys retirement plans.  Schauble says Draghi deserves a share of the blame directly and that his policies have led to the rise of populist political parties.

Draghi counters that the ECB has been the only institution fighting recession and deflation in the currency bloc.

“With rare exceptions, monetary policy has been the only policy in the last four years to support growth.”

At the same time, European governments have been falling woefully short on the labor, political  and fiscal reform front. 

And at the end of the week, eurozone government bond yields were rising, even though Draghi insisted interest rates will remain lower for longer.  [The 10-year German Bund closed the week with a yield of 0.23% vs. 0.13% the week before, a big percentage move.]

Other tidbits....

U.K. retail sales posted their biggest monthly decline in more than two years in March, down 1.6%, ex-gasoline. 

And the negotiations over the latest Greek bailout continue, with the IMF not wishing to support the next agreement that Greece and its creditors reach, which Greek officials find hypocritical.  While the fund is owed $12 billion, it is not promising to lend any new money this year, so, Greece argues, how can the IMF push them so hard when it comes to new austerity when it isn’t willing to lend new money?  At least the ECB and EU are promising further funding as part of any deal.

But the IMF is the body seeking debt relief for Greece, which the EU, read Germany, are adamant against.

[To be clear, the third bailout was long finalized...it’s the doling out of further tranches of aid within it that is again in dispute as Greece’s financial program is constantly under review.]

Regarding migration, there was a noticeable reduction in March of migrants to Greece after the EU-Turkey deal, but the total to Italy is jumping, 24,000 in the first three months, up 85% compared with last year.  Italy is preparing to ask its EU partners for further support in coping with the new arrivals because its neighbors have been hardening their policies.  Prime Minister Matteo Renzi said the other day, “We won’t look away if someone is breaking the rules (i.e., the neighbors and not being more humanitarian, per EU ‘values’).”

Wednesday there was a deadly shipwreck that claimed some 500 lives in an accident involving smugglers and migrants crossing to Italy.

Pope Francis, prior to this latest disaster on the Mediterranean, made an emotional visit to the Greek island of Lesbos to meet with migrants and he ended up taking three families whose homes had been bombed in the Syria war back to the Vatican with him.

Separately, the European Union issued a report that member states granted asylum to more than 330,000 in 2015, half of whom were Syrians.  The 330K was an increase of 72% compared with 2014.  Of course hundreds of thousands more entered the EU and are either in legal limbo or hiding in the shadows.  It’s only now through the EU-Turkey deal that new arrivals can be automatically sent back if they don’t qualify.

On the Brexit front and the issue of Britain leaving or staying in the EU, President Obama weighed in by writing an op-ed in London’s Daily Telegraph prior to his arrival in the U.K.

Obama said Britain’s influence is enhanced by its membership in the European Union.

“The European Union doesn’t moderate British influence – it magnifies it,” Obama said.  “A strong Europe is not a threat to Britain’s global leadership; it enhances Britain’s global leadership.”

London Mayor Boris Johnson, a Conservative and a leading figure in the Leave campaign (as well as a man after David Cameron’s job), said Obama’s argument was “hypocritical” and he should not be intervening in the debate ahead of the June 23 referendum.

“For the United States to tell us in the U.K. that we must surrender control of so much of our democracy – it is a breathtaking example of the principle of do as I say but not as I do,” Johnson wrote in the Sun newspaper.  “It is incoherent.  It is inconsistent, and yes it is downright hypocritical.  The Americans would never contemplate anything like the EU, for themselves or for their neighbors in their own hemisphere.  Why should they think it right for us?”

The Vote Leave campaign said in a statement on Friday that the U.S. refusal to give up national sovereignty to international courts, and its lack of free movement of citizens from neighboring Canada and Mexico, are evidence that Obama isn’t prepared to accept measures that replicated the U.K.’s EU membership.

“President Obama, and every one of his predecessors, have ferociously protected the sovereignty of the U.S.A.,” said Iain Duncan Smith, a former Cameron cabinet minister who resigned amid the row over the referendum.  “What I do find strange is that he is asking the British people to accept a situation that he patently would not recommend to the American population.”  [Bloomberg]

U.K. Treasury chief George Osborne warned that the British economy could be around 6% smaller in 2030 if it left the EU than if it remains a member.  “Under any alternative, we’d trade less, do less business and receive less investment.”

But the likes of Boris Johnson argue the U.K. would thrive economically outside the EU because it would continue to trade with Europe – which accounts for almost half of Britain’s exports – while also being freer to negotiate trade deals with faster-growing economies without Brussels-imposed restrictions.

But what the Leave folks are failing to note is there would be chaos should Britain leave, with every deal that Britain has with the Union needing to be reworked, let alone the fact that trade deals take an inordinate amount of time to negotiate so it’s not as if Britain can just flip a switch and have everything it wants.  [Items such as visa-free travel throughout the EU for Brits would also be no sure thing.]

German Finance Minister Wolfgang Schauble warned George Osborne that Berlin would be a tough negotiator if the U.K. votes to leave.

Italy’s finance minister, Pier Carlo Padoan, told the Financial Times in an interview that “Brexit is a major threat to Europe.  It would certainly damage the U.K. in the first place, but also the rest of Europe...particularly the political consequences.”

On this last point Padoan is referring to Brexit sending “a strong message to those who don’t like Europe that Europe can be undone.”

---

Turning to Asia....just a few notes on China. Normally, the National Bureau of Statistics releases quarter-over-quarter GDP figures at the same time as the yearly numbers, but this time they hid it until a few days after the latter was released, claiming they needed more time.  Here’s why it’s important.

While the year-on-year GDP figure for the first quarter was 6.7%, in line with expectations, the seasonally adjusted GDP for Q1 was just 1.1% compared with last year’s fourth quarter – the lowest quarterly rise since 2010.

So this downer comes as other data shows the Chinese economy was stabilizing during the first quarter, including positive surprises from trade, inflation, and output.  It all just speaks to the credibility issue when it comes to numbers here.

Separately, house prices in China’s leading cities surged as much as 63% last year to March while lower-tier cities saw prices tumble, further signs of a bifurcated market.

In Japan, the flash manufacturing reading for April came in at a dreadful 48.0 vs. 49.1 in March, with recent earthquakes compounding already-sluggish growth as measured by the PMI series.  The 48 is the worst figure since January 2013.  Aside from the earthquakes disrupting activity across one of the nation’s industrial heartlands, exporters are also grappling with a resurgent yen.

Both production and new orders declined markedly.

A slew of economic data next week, including on consumer spending, factory output and inflation, is likely to keep the Bank of Japan under pressure to roll out more stimulus to support the economy.

There is also renewed talk that Prime Minister Shinzo Abe will call off a sales tax hike scheduled for next year to focus on bolstering domestic demand.

Street Bytes

--The markets were actually mixed on the week, despite the Dow Jones’ 0.6% gain to close above 18000.  The S&P 500 advanced 0.5% to 2091, just 39 points shy of its record all-time high, but Nasdaq, after some high-profile earnings shortfalls, fell 0.7%. 

Another heavy week coming up, including not just the Fed but a reading on first-quarter GDP.  The Atlanta Fed’s GDPNow indicator pegs it at just 0.3%, though the Street is closer to 0.9%, while you also have earnings from the likes of Apple, Amazon and Facebook.

--U.S. Treasury Yields

6-mo. 0.36%  2-yr. 0.82%  10-yr. 1.89%  30-yr. 2.71%

The yield on the 10-year rose 14 basis points from 1.75%.

--Traders waited on Sunday’s summit of 16 oil ministers in Qatar, looking for an agreement on production levels that would further firm up prices, but when the meeting broke up Sunday evening, Qatar’s Mohammed Al Sada, speaking for the group, said: “The inclusion of all OPEC members would definitely help in reaching an agreement,” promising more consultation prior to June’s formal OPEC meeting.

Ergo, there was no deal because Iran decided on the eve of the meeting not to show, and then when the others got together, Saudi Arabia suddenly insisted every OPEC member, including Iran, must subscribe to a freeze on production.

What emerged is that the Saudis have a new face, Mohammed bin Salman, a 30-year-old deputy crown prince who’s taken control of economic policy in the kingdom and has been warning no deal was possible without Iran’s participation.  For its part, Iran, post-sanctions, insists it has the right to ramp up production to pre-sanctions levels.

The thing is, most of the big players, including Saudi Arabia and non-OPEC Russia were already producing at record levels, so a freeze at January production is hardly the actual reduction in production OPEC and Russia need.  So the message was sent: every country for itself.

Oil, as measured by West Texas Intermediate, closed last week at $40.36 and with the bad news on Sunday, it was expected the price would crater, at least a couple dollars, but following an initial brief decline Monday morning, crude took off again and closed the week at $43.73, the highest weekly close since early November.

Earlier, the International Energy Agency had said overall non-OPEC production was expected to fall by 700,000 barrels a day this year, but that was easily going to be offset by Iran, alone, which has vowed to hit 4 million barrels a day after reportedly ramping up already to 3.3mbd.  [Some dispute Iran’s ability to do so.]

Separately, Prince Mohammed bin Salman said Saudi Arabia could increase output to 11.5mbd and go to 12.5 million in six to nine months “if we wanted to.”  The country pumped 10.2mbd last month, according to data compiled by Bloomberg.

For now, prices were helped somewhat by an oil workers’ strike in Kuwait that reduced production there, and the IEA and Energy Information Administration are growing more confident there will be a significant rebalancing between supply and demand in the market later this year, again, owing in no small part to reductions in the U.S.

We need a few more weeks to shake it all out and get more real-time data.  I’ve said the last fe months that you could wake me up when we got above $40 and stayed there for a while.  It’s now been at $40 for two weeks.  I’ll define ‘a while’ as another two.  At that point I’ll decide if the true bottom is in.

--Schlumberger, the world’s largest oilfield services company, warned the decline in global drilling activity and the rate of disruption “reached unprecedented levels” in the first three months of the year as it shed 2,000 jobs in the first quarter, bringing its cuts since the collapse in crude prices began in 2014 to about 36,000 jobs.

The company said global spending reductions for the year will approach 25 percent.  The number of land rigs in the U.S. declined 31 percent.

Profits fell to $501m in Q1 from $975m in the year ago period.

--Halliburton Co. said on Friday it reduced headcount by more than 6,000 during the first quarter, with the oilfield services provider reporting revenue dropped 40%.  The deadline on its merger with Baker Hughes is April 30, but as we now know this one isn’t coming about.

--Hedge funds have suffered their worst quarter in seven years for redemptions, with more than $15bn pulled out; the total amount invested in hedge funds falling to $2.86 trillion in the first quarter, marking the first time since 2009 that the sector has faced two consecutive quarters of net outflows, according to data from Hedge Fund Research and the Financial Times.  Some high-profile funds such as Bill Ackman’s Pershing Square have had awful performance numbers and many investors, ticked at the high fee structure (many paying 2 percent for management, and then 20 percent of profits), have said enough.

--Goldman Sachs Group reported lower first quarter results, with net income falling 60% to $1.14 billion. Revenue dropped 40% to $6.34 billion from $10.62bn, shy of expectations.

Trading revenue fell 37%, while investment banking revenue dropped 23%.

The investment bank cut total expenses 29% in the quarter, which doesn’t portend whopping bonuses for Goldman traders and bankers.

--Morgan Stanley reported earnings that beat expectations, though they were down 53% from year ago levels (off 36% ex- one-off items), with revenue falling 21%.

--Tens of thousands of Wall Street bankers face tighter restrictions on how they are paid under new rules proposed by regulators; another move designed to curb excessive risk-taking at the country’s biggest financial firms.

The rules would require the biggest banks to defer payment on at least half of executives’ bonuses for four years, a year longer than what is common industry practice.  “The plan also would require a minimum period of seven years for the biggest firms to ‘claw back’ bonuses if it turns out an executive’s actions hurt the institution or if a firm has to restate financial results.”  [Wall Street Journal]

--Alphabet (Google) shares fell sharply, 5.3%, after first-quarter earnings missed Wall Street’s expectations and Google ad prices tumbled.

Sales were up 17.3 percent to $20.3bn, though ex-the costs of acquiring traffic, Alphabet sales were $16.5bn.

Net profit rose 20% to $4.2bn, but cost per click at Google’s own websites fell 12%.

CFO Ruth Porat said the shift from desktop search to mobile and programmatic advertising (such as display ads on YouTube) came with higher costs of reaching users.

Headcount increased 16% to 64,000 employees, with hiring focused on cloud and apps.

But in a sign of the times, and U.S. tax laws, of Alphabet’s $75.3bn in cash, 60% is held overseas.

--Shares in Microsoft dropped more than 7% after the software company reported lower than expected revenues and earnings for its fiscal third quarter.  The company added sales in the current quarter will be below analysts’ expectations as the transition to the cloud has also put pressure on margins.

Microsoft’s revenues were up just 2% from the same period a year ago, while profits fell slightly to $5bn on an adjusted basis.  The company expects revenues in the current quarter at the same level as the past one.

The weak PC market, which Gartner said shrank 9 percent during the first quarter, also had an impact on Microsoft sales.

--IBM delivered another miserable quarterly earnings report.  Yes, it is making solid progress in its cloud computing initiatives, but the company reported a 21% decline in net profit from continuing operations in the first three months of the year, with first-quarter revenue declining 5%.

IBM said the businesses targeted for growth and investment, like the cloud and Watson’s data initiatives, grew by 14%.  While decent, the size is nowhere sufficient to make up for the downfalls in the larger parts of the company. Systems hardware was down by 20%, for example.

Bottom line, overall revenue dropped for a 16th consecutive quarter, all with CEO Ginni Rometty at the helm.  Why is she still there?

--Johnson & Johnson reported revenue was up just 0.6 percent from a year ago in the first quarter, but this topped the Street’s expectations.  The figure would have been higher were it not for the strong dollar. Nearly half the company’s sales are from overseas.

--McDonald’s continues to rock and roll, reporting global comp sales increased 6.2% in the first quarter, though consolidated revenues decreased 1% (up 3% in constant currencies).  Earnings came in better than expected.

In the U.S., Q1 comp sales increased 5.4%, fueled by the continuing success of All Day Breakfast.  I mean this was a company that was dead in the water, with falling comp store sales growth until CEO Steve Easterbrook took over.

--Caterpillar Inc. posted lower quarterly net profit as slowing activity in global mining and construction hurt sales of machinery.  Revenue for the world’s largest heavy machinery manufacturer fell to $9.46 billion from $12.7 billion a year ago, but the company really wasn’t  that pessimistic amid signs the bottom could be in.

--Volkswagen reached a settlement with U.S. regulators over a fix for its emissions scandal.  In a court hearing in California it was announced the company agreed to buy back the affected cars and pay compensation.  The deal extends to 480,000 cars that have diesel engines.

Consumers who bought affected VW cars have three options:

Have VW buy back their vehicle; have consumer’s vehicle modified; have leases cancelled for consumers.

But the case is far from over as the company faces another series of testing deadlines as it seeks to draw a line in the U.S.

VW had already agreed to offer owners the option to have their vehicle bought back.

The full terms of the deal between VW and regulators is to be disclosed to the public on June 21.

Separately, Volkswagen AG more than doubled provisions to pay for the emissions-cheating, leading to the biggest loss in its history.  VW has now set aside $18.2 billion.  Wow.

--General Motors said revenue rose to $37.3bn during the first quarter, compared to $35.7bn from the prior year period. Earnings came in at $2bn.  A strong performance in the U.S. offset ongoing weakness in Europe and South America.

CEO Mary Barra touted robust growth in SUV and luxury segments in China, while GM is outpacing the industry in Europe.

--Ford revamped the Mustang model with foreign sales in mind and it would appear to be working, as the Mustang was the world’s best-selling sports coupe last year.

About 19,000 out of a total of 141,000 Mustangs were sold outside the U.S. last year.  16,000 were sold in Europe.  The car is made in Flat Rock, Mich.

--Mitsubishi Motors Corp. says it found evidence its employees falsified emissions test data, a la Volkswagen.

Mitsubishi also admitted falsifying fuel economy data for more than 600,000 vehicles sold in Japan, including falsifying tire pressure figures.  Executives took a deep bow and there was no applause.

--United Continental, having staved off a proxy fight, reported first-quarter net income dropped 38% from a year earlier, though excluding one-time items, the company beat the Street’s expectations.

In the settlement with two activist investors that own 7% of the shares, United agreed to immediately name two investor representatives to its board and select a third by mutual agreement within six months.

Revenue declined 4.8% to $8.2 billion and the company issued downbeat guidance in the current quarter, pointing to soft April bookings, overcapacity and the currency impact.

--Coca-Cola’s growth slowed in the first quarter, with soda volumes flat after five straight quarters of increases.  Flagship Coke declined in every region but Asia, in no small part because of health concerns over sugary drinks.

Net profit fell 4.8% and revenue dropped 4% in the first quarter from a year earlier.

Coke is doing OK with its low-margin beverage products, like water (“still-beverages”).

But wait...there’s more!  Coke is redesigning some of its products, like Diet Coke and Coke Zero, to contain some of its brand’s red coloring, plus it will be changing the names of some of its drinks to help consumers identify just what the heck they’re buying.

--PepsiCo Inc. reported year-over-year declines in revenue for the first three months, down 2.9% to $11.86 billion.  Revenue increased 3% in its Frito-Lay North America segment and 1.5% in North America Beverages, but decreased 3% at Quaker Foods North America.

Profit dropped from $1.22 billion to $931 million.

--Yum Brands, parent of KFC, Pizza Hut and Taco Bell, reported a 6% rise in first-quarter same-store sales in its China division, which compares very favorably with a 12% drop in the year ago period after a food scare tied to KFC’s supply chain.

More specifically, KFC China saw a 12% jump in same-store sales growth, owing to a Chinese New Year promotion.

Total sales worldwide for Yum were largely flat at $2.6bn, though earnings beat expectations.  The company gave solid guidance for the rest of the year.

Yum previously announced it would split off its China business.

--Netflix shares cratered after the company gave poor guidance for the current quarter.  The streaming video provider expects to add less than half as many subscribers as it did during the first quarter.

Next month, many Netflix members will see a $2 monthly increase to its most popular subscription plan, thus the outlook for many either dropping their subscriptions or it being an inhibitor for new ones.

Netflix forecast net income in the current quarter of $9 million, compared to $26 million in the same period last year.

--Starbucks said its profit rose 16% in the first quarter, but sales growth fell short of Street expectations and the company’s stock fell 5% in response.

Global comp store sales were nonetheless up a solid 6%, including 7% in the U.S., with food now accounting for 20% of sales here.

Sales were up a less than robust 3% in Asia and only 1% in the region defined as Europe, the Middle East and Africa.

--The price of iron ore has been rising, a good sign as it’s the key ingredient in steel-making so a benchmark for the global economy. At $70 a ton, it’s at a level last seen at the end of 2014; up 60% from the start of the year

Mining giants like BHP have been slashing production which only helps on the price side if demand stabilizes and then picks up.  Heretofore, there has been tremendous oversupply, led by China.  But BHP said this week it doesn’t expect the rise in prices to hold more than a few months, because more supply is set to hit the market all over again.

--Intel announced it would lay off up to 12,000 employees, or about 11% of its global workforce.  With over 112,000 workers worldwide, it’s going to be a rather sensitive subject and CFO Stacy Smith declined to say where the majority of the layoffs would occur; though it’s assumed there will be a major impact on Oregon and the Portland area, where 18,500 work.

Chandler, Arizona, is the second-largest site in the country with 11,000 employees, though California has 12,500 at two sites.

On the earnings front, Intel’s revenue rose 7% in the first three months of the year, with earnings slightly ahead of year ago levels.

--Yahoo reported revenue of $1.08 billion in the first quarter, down from $1.22bn the prior year. 

Revenue from its mobile and native advertising business grew 6.8%, but everything else essentially fell 9%.

Investors are waiting to see who will sweep in and buy the prime web site operation.

--Under Armour Inc. reported a 30% jump in revenue to $1.05 billion for its most recent quarter, owing in no small part to Stephen Curry as the company’s small footwear business logged a 64% gain in revenue.

For the quarter, the company posted a profit of $19.2 million, up from $11.7 million a year earlier, but the company’s performance still pails to that of Nike.  UA’s revenues are 1/8th of Nike’s, the latter at $8.03bn for its latest quarter.

--Editorial / Wall Street Journal

“President Obama claimed credit at a Los Angeles fundraiser last week for ‘the steady progress that happens when people who love this country decide to change it,’ and reality is unlikely to darken his farewell tour.  But for everyone else, note that the largest U.S. health insurer is quitting ObamaCare.

“On Tuesday UnitedHealth Group reported a terrific first quarter, with strong performance across nearly all business lines. There was one exception: The conglomerate’s insurance exchange unit raised its projected Affordable Care Act losses for 2016 to $650 million from $525 million, after booking $475 million in red ink last year.

“CEO Stephen Hemsley said ObamaCare’s instability, small market size and costly patient population ‘continue to suggest we cannot broadly service it on an effective and sustained basis.’

“He said UnitedHealth will withdraw to ‘only a handful of states’ in 2017....

“If UnitedHealth departs all markets, the number of U.S. counties served by three or more ObamaCare insurers will fall to 48% from 64% today, while the counties with a single insurer will rise to 24% from 7%.

“These trends could lead to even larger premium spikes than the new ObamaCare normal. This would undermine the sustainability and viability of the exchanges, as would the other alternative, which is for other insurers to start dumping unprofitable ObamaCare plans from their portfolios.  UnitedHealth spent months calling for changes to the law, which liberals dismissed as empty threats to extract regulatory concessions.  Whoops.”

--FBI Director James Comey suggested the bureau paid more than $1 million to access an iPhone belonging to one of the San Bernardino attackers. While speaking at a security forum in London, Comey said the cost of the tool was “more than I will make in the remainder of this job, which is seven years and four months, for sure.”

When you do the math, his statement implies the bureau paid at least $1.3 million to get into the phone.

“But it was, in my view, worth it,” Comey said.

--Remember how I’ve been telling you Apple would get screwed in China?  Thursday, the New York Times first reported Apple’s online movie and book stores were shut down less than seven months after being launched.  After receiving government approval, the sites were blocked last week on orders from the broadcasting regulator.

Apple said in an email to the Times that it hoped the services could resume “as soon as possible,” but offered no details.

The broadcasting regulator has been stretching its authority to online content.  I’m taking a mini-victory lap.

--I have written of Alibaba founder Jack Ma’s takeover of Hong Kong’s South China Morning Post and the SCMP interviewed him for the first time the other day on a range of topics.

Ma said China’s economy will face “a difficult three to five years” but the slowdown will be good for its long-term development.

Ma dismissed fears China would follow Japan’s stagnation path, saying China still had untapped potential.

As the SCMP wrote: “Comparing China to an ocean liner, Ma said the Chinese leadership understood that the country’s old growth model was unsustainable and that they needed to chart a new course....

“Fortunately for China, he said, the rise of its internet economy happened at the right time.

“ ‘The traditional industries are struggling, but we also see growth in domestic consumption, the services industry and the hi-tech sector, and young talents are flocking to these areas,’ he said.”

[More on this interview below on a different topic.]

--The South China Morning Post reported that Hong Kong Disneyland laid off a sizable number of workers for the first large-scale sackings since it opened in 2005.  I was there a number of years ago and told you it wasn’t that great.

Well now it has major competition from Shanghai Disney Resort, due to open in June this year and it is three times bigger.

Total visitors to the HK/Lantau-based park were down 9.3 percent to 6.8 million last year, compared with a year ago, as 23 percent fewer mainland tourists visited.

--Meanwhile, Disney reported its movie “The Jungle Book” took in $103.6 million in the U.S. and Canada its first weekend, well above the analyst projections of $80 million, making it the second-largest April opening in history.

--Uber has agreed to pay drivers in California and Massachusetts as much as $100 million to settle lawsuits in both states over whether its drivers are independent contractors or employees.

Uber drivers in the two states maintained they are employees and therefore should be reimbursed for expenses or losses incurred during the discharge of their duties.

But the settlement means that Uber can consider the drivers independent contractors moving forward, a big win as the company’s business model depends on keeping costs low by mainly serving as a conduit between drivers and riders.

--President Obama and Congress are dueling over spending for the Zika virus.  The president requested $1.9 billion, but Republicans want the money to come from unused funds in the Ebola account.

But it’s time for action.  Freakin’ reach a compromise so the states can start spraying!!!

--The Metropolitan Transportation Authority in New York said Gotham had the highest number of weekday subway ridership last year since 1948.

--Major fight at ABC as Michael Strahan, half of the “Live with Kelly and Michael” show, was plopped onto the couch at ABC’s “Good Morning America” program, as ABC/Disney execs scramble to retain their ratings lead over NBC’s “Today” show.

An industry source told the New York Post, “It’s a signal for (GMA’s) George Stephanopoulos.  This [means] get lost, we’re not paying you $10 million.”

But it’s not as if George and Michael do the same thing.  I mean I’m not about to listen to Michael Strahan go off on U.S. Syria policy.

NBC’s “Today” has been recovering from the Ann Curry debacle of 2012 and is now No. 1 in the 25-to-54 demographic.

The morning shows are cash cows.  “GMA” raked in $405.5 million in 2015, according to Kantar Media, but it’s losing its audience, which means fewer ad dollars.

But the person you’ve no doubt heard who is livid as a result of Strahan’s move is Kelly Ripa, who is staging a sickout, feeling blindsided.  But don’t cry for her.  Even after paying her $20 million a year, the show turns a profit of about $30 million, a source told The Post.

Possible replacements for Strahan include Neil Patrick Harris and CNN’s Don Lemon.

However, now there is word the show could be discontinued.  ABC execs are afraid Kelly would go rogue on live TV come her scheduled return on Tuesday.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey/Iran: The White House expressed concern Thursday about Russia moving equipment into Syria, as the ceasefire is in serious jeopardy.  President Obama said if it fails, “none of the options are good.”

While in Saudi Arabia for a security conference, Obama said, “The problem with any Plan B that does not involve a political settlement is that it means more fighting, potentially for years.  Whoever comes out on top will be standing on top of a country that’s been devastated and that will then take years to rebuild.”

Syria already is practically beyond repair, Mr. President.  It will take decades, not “years” to rebuild, assuming the conflict ended today and that’s not going to be the case.  You have only yourself to blame.

Indirect peace talks in Geneva are in total disarray as the opposition has threatened to abandon negotiations following a series of attacks.

Assad Zoubi, chief negotiator of the Syrian opposition’s High Negotiations Committee, said that for the talks to go on, Syrian President Bashar Assad must release thousands of political prisoners and “stop the massacres he is committing every day,” as reported by Reuters.

More than 50 were killed in a Syrian airstrike on a market in the town of Ma’arat an-Numan on Tuesday, a town that held regular protests against Assad and the al-Qaeda linked Al-Nusra, said Gareth Bayley, Britain’s Syria envoy.

“For the Syrian people to continue to trust this process, the cessation of hostilities (partial cease-fire) must be respected – that means an end to all targeting of civilians,” Bayley said Thursday.

The Syrian government called the opposition’s freeze on taking part “absurd theater.”  What bastards.

Syrian regime forces, with Russian artillery, have been amassing troops around Aleppo.

Russia had said it was withdrawing some of its military aircraft from Syria, but there has been no letup in Russian airstrikes while more Russian heavy weaponry has arrived in the country since March.

Separately, the UN has been evacuating hundreds of people from besieged Syrian towns in a rare sign of humanitarian progress.  But more than four million in Syria live such towns or hard-to-reach areas, with limited or no access to food or medical supplies.

Also, the U.S. Air Force deployed a B-52 bomber against ISIS, the first time the B-52 has been used in combat since 1991.

But ISIS made gains in northern Syria in Aleppo province, bordering Turkey, with its many supply lines.

ISIS was also fighting with other extremists, including Nusra Front, in a Palestinian refugee camp in Damascus, the Yarmouk camp, where 10,000 civilians “are facing starvation,” according to a UN spokesman.

Finally, Iran has deployed the regular army in its first overseas operation since the 1979 Revolution to bolster Assad.  Heretofore, Iran has been deploying the elite Revolutionary Guards.  Iran is intent on keeping Assad in power and is boosting its military presence in Syria in an attempt to influence any rift between Assad and Vladimir Putin.

Iranian leaders believe Putin could side with Washington to remove Assad.

Editorial / Washington Post

“The Syrian cease-fire has achieved diplomatic zombie status: It is dead but lives on in the otherworldly rhetoric of its promoters, headed by the Obama administration.  Heavy fighting has resumed in several parts of the country, including south of Aleppo, in the coastal province of Latakia and in the suburbs of Damascus.  Humanitarian aid deliveries have virtually ceased.  Airstrikes killed dozens of civilians in two rebel-held towns in Idlib province on Tuesday.  In Geneva, the head of the opposition’s delegation said it would not return to UN-sponsored peace talks until the government stopped its attacks and allowed aid convoys to enter besieged areas.

“The U.S. response to this renewed carnage has been to point out, weakly, that not every part of Syria has returned to all-out war.  ‘More Syrian people are living better lives as a result of the cessation than they were before,’ State Department spokesman John Kirby declared Monday. Unfortunately, such rhetoric appears to be all the United States has to offer.  Since President Obama refuses to take steps such as creating a safe zone for refugees or stepping up aid to the rebels, the United States lacks leverage over the regime of Bashar al-Assad and its Russian and Iranian allies....

“The White House reported Monday that Mr. Obama had spoken to Mr. Putin by telephone about the unraveling cease-fire.  A statement suggested he covered all the bases, including ‘the importance of pressing the Syrian regime to halt its offensive attacks against the opposition,’ the urgency of humanitarian access and the need for progress toward a political solution. But there was no indication that Mr. Putin was given any incentive to respond cooperatively, other than an appeal to his goodwill.  If that’s the case, the cease-fire will remain a zombie.”

As for Iraq, if you are looking for the battle of Mosul, the Kurds are saying there are not adequate numbers of forces, let alone funding and political leadership and a vision for what happens the day after.

Jackson Diehl / Washington Post

“All this points to a stark bottom line: There will be no liberation of Mosul in 2016. The Islamic State will outlive the U.S. administration whose lapses in Syria and Iraq helped to create it.  It will be the ugliest piece of Barack Obama’s legacy.”

Saudi Arabia: in his last trip to the kingdom, President Obama met with Saudi King Salman to seek joint action on the threats posed by Iran and Islamic State, even as most of the Gulf Arab monarchies in the region have been exasperated by the Obama presidency, and the U.S. pullback from the region, which has allowed Iran to fill the void.

The mood wasn’t helped by Obama’s recent remarks in an interview for The Atlantic where he commented on the “complicated” nature of the U.S.-Saudi relationship, describing some Gulf and European states as “free riders” who rely on the U.S. to do their dirty work.

Obama has been encouraging Gulf states to arrive at a “cold peace” with Iran to douse sectarian tensions and allow all sides to instead focus on Islamic State.

As to the bill in the U.S. Congress that, if passed, could hold the kingdom responsible for any role in al-Qaeda’s September 11, 2001 attacks, there was no official word on whether this had been discussed between Obama and Salman but one assumes it was a major topic.  Members on both sides of the political aisle in Washington are beginning to have misgivings because it can open up the U.S. to suits from citizens of other countries.

As for the 28 sealed pages of the 9/11 Commission Report – the section that details the Saudi role in the attacks, those should be released.  9/11 Commission chairman, Tom Kean, said the pages should be made public. Vice Chairman Lee Hamilton says he’s “embarrassed” it hasn’t happened already. Both Barack Obama and George W. Bush refused to declassify them.

But there have been leaks and, as the New York Post opined:

“As early as 2003, a U.S. official who’d read the pages told the Los Angeles Times they linked ‘direct involvement of senior Saudi government officials in a coordinated and methodical way directly’ to the terrorists.

“And on Wednesday, it emerged that back in 2002 investigators found a certificate for an al-Qaeda bombmaker showing he’d taken flight lessons with 9/11 attackers.  The evidence was in an envelope obtained from the Saudi Embassy in Washington....

“Riyadh actively funded al Qaeda and other Islamist extremists for decades – officially Washington shied away, for fear disclosure would threaten the U.S.-Saudi relationship.

“It’s now nearly 15 years since 9/11.  The American people finally deserve to learn the full, unvarnished and ugly truth.”

On a different matter, on Wednesday, Iran’s Supreme Leader Ayatollah Ali Khamenei attacked Riyadh’s attempts to isolate Hizbullah, Iran’s ally in Lebanon (and Syria).

“Hizbullah is shining in the Muslim world.  It doesn’t matter if a corrupt, dependent and hollow government with the use of petrodollars condemns it in a statement.  To hell with it,” Khamanei wrote in a series of tweets.

Editorial / Wall Street Journal

“President Obama arrives in Riyadh Wednesday to meet leaders of the Gulf Cooperation Council, and if he senses a chill it won’t be the air conditioning.  America’s traditional Arab allies fell betrayed by the President, and it’s not clear he wants to dispel the impression.

“This has been obvious since Mr. Obama anticipated Donald Trump by dismissing U.S. allies as ‘free riders’ in a recent interview with Jeffrey Goldberg.  The President said the Saudis need to learn to ‘share the neighborhood’ with archenemy Iran and he cast doubt on the value of the Saudi alliance.  ‘He is clearly irritated that foreign-policy orthodoxy compels him to treat Saudi Arabia as an ally,’ Mr. Goldberg wrote.

“Riyadh hasn’t been shy about voicing its dismay about Mr. Obama’s nuclear deal with Iran or his failure to enforce the chemical red line against the Assad regime in Syria.  Turki al-Faisal, the former Saudi ambassador to the U.S., has said the Administration’s Syria policy ‘would be funny if it were not so blatantly perfidious.’

“It won’t burnish Mr. Obama’s legacy to leave his successor a Middle East of emboldened enemies and distrustful allies.  The U.S.-Saudi alliance is nobody’s idea of a marriage of like minds, much less of moral values.  But Washington has a vital interest in making sure the oil-rich kingdom doesn’t become another failed Arab state, or an aggressive freelancer pursuing interests at odds with America’s.”

Israel: Prime Minister Benjamin Netanyahu headed to Moscow looking for a commitment that Russia’s reduction of its forces in Syria won’t let Iranian-backed Hizbullah strengthen their forces on Israel’s northern frontier.

The two sides then agreed that their defense ministers needed to coordinate their actions, as Israel “preserves the freedom of action of the IDF and the air force in areas that are important for our security. And I think that has been achieved,” Netanyahu said after his meeting with Putin.

Earlier, Netanyahu declared that Israel will never give up the strategic Golan Heights, captured from Syria almost 50 years ago.

Netanyahu is intent on preventing shipments of advanced weapons to Lebanon through Syria.

Afghanistan: A suicide attacker detonated a massive car bomb in the center of Kabul, after which gunmen stormed the area, and the last death toll I saw was 68 dead, mostly civilians, with over 300 injured.

This comes a week after the Taliban said it was launching its “spring offensive,” warning of large-scale attacks.

Tuesday’s bombing happened in a busy neighborhood where homes, mosques and schools are nestled close to the Ministry of Defense and other government compounds.  The blast was so powerful it shattered windows a mile away.  The presidential palace was only a few hundred meters away from the carnage.

North Korea: Satellite images show that Pyongyang may have resumed tunnel excavation at its main nuclear test site, according to a U.S. North Korea monitoring website, 39 North, run by Johns Hopkins University’s School of Advanced International Studies.  Such activity could easily be preparation for a nuclear test, as was the case in January.

Some analysts believe Kim Jong Un will order the test before a ruling party congress in early May, especially after the embarrassing failure of an intermediate-range missile test last week.

China: President Xi Jinping added a new military leadership post – commander-in-chief of a new joint-battle-command center – as part of China’s ongoing restructuring of its armed forces.

Congratulations, President Xi!  He is also titular head of the People’s Liberation Army, or PLA, and the only civilian on the party’s 12-man commission that oversees the military.

Back to Jack Ma and his interview with the South China Morning Post newspaper in Hong Kong, in talking about his vision for the publication that is one of the best in the world, Ma said:

“I believe the most important thing for the media is to be objective, fair and balanced. We should not report a story with preconceptions or prejudice,” he said.

“Sometimes people look at things purely from a Western or an Eastern perspective – that is one-sided. What the Post can do is to understand the big ‘why’ behind a story and its cultural context.

“I want to stress the importance of being fair to our readers.  You should not impose your own view and prejudice on the readers and try to lead them to a conclusion. As a reader, I understand what a fair report is.”

Ma wants to transform the Post into a global media agency with the help of Alibaba’s technology and resources.

Ma also reiterated his promise that Alibaba’s management would not take part in the Post’s newsroom operations, but he named executive vice-chairman Joe Tsai as chairman of the paper and I don’t trust him.  Yes, he’s Taiwan born and Yale educated, but many of his comments have been as if he is controlled by Beijing. 

Separately, as part of China’s continuing crackdown on the internet, a hugely popular online personality, Papi Jiang, who had rocketed to fame with her series of humorous videos offering irreverent observations on everyday life, had her videos taken offline, due to her use of “coarse language,” following “reports from the public and evaluations by experts,” according to the government’s media regulator. The woman can upload her videos again when the coarse language has been removed and unspecified “regulations” adhered to.

Papi Jiang has close to 11 million followers on Weibo.  She vowed to “pay even more attention to my words and my image” in a Weibo post Monday night.  Pathetic.  [South China Morning Post]

Russia:  Moscow and the NATO alliance met in Brussels on Wednesday after a two-year breakoff in talks as they try to re-open lines of communication.  But after talks lasted longer than expected, there were no breakthroughs.

The core issue continues to be Ukraine.  Moscow claims it intervened to defend Russian speakers in Crimea and eastern Ukraine in what was effectively a civil war.  NATO rejects these assertions, insisting Russia is waging a proxy war.

But the Kremlin got what it wanted with the meeting...the perception that the West came knocking at the Kremlin’s door for re-engagement.

Separately, Poland’s Foreign Minister Witold Waszczykowski described Russia as a bigger global threat than ISIS. Speaking at a security forum in Slovakia’s capital of Bratislava, the foreign minister said:

“We have existential threats and non-existential threats. There are non-existential threats, such as terrorists, or the massive wave of migrants.  Russia’s actions are a kind of existential threat, because they can destroy countries.”

Waszczykowski has urged NATO to approve the deployment of troops on the alliance’s eastern borders.  [Irish Independent]

Chad/Nigeria: American military officials say that ISIS and Boko Haram have begun to collaborate more closely, raising the alarm that American allies in North and Central Africa are in the crosshairs more than ever.

U.S. officials recently discovered a weapons convoy believed to be from ISIS in Libya that was headed for the Lake Chad region.

But the relationship between the U.S. and Chad is a tense one as dozens of Chadian soldiers who had voted for opposition candidates in recent elections reportedly disappeared.  Chad is run by President Idriss Deby, who will soon begin his fifth term in office, having seized power in a coup and governing ever since with an iron fist for 26 years.

U.S. ambassador to the United Nations, Samantha Power, was in Chad this week and she pressed him on the disappearances.  Deby denied this was the case.

Deby has been a stalwart, it seems, thus far in the fight against Boko Haram and now ISIS.  But can he be trusted?  Nope.

Brazil: President Dilma Rousseff vowed to defend her presidency in the face of the vote by the lower house of Congress on Sunday to proceed with impeachment proceedings against her.  The 367-137 margin was comfortably above the 342 needed to move on.

Rousseff told reporters the next day the vote “was an immense violence against truth, democracy and the rule of law.”

The process moves on to the Senate, where a political trial is expected to get under way by mid-May.

Rousseff’s approval rating has plunged to around 10%, though only 61% support impeachment. 

And she’s not really charged with corruption, rather using budgetary sleight of hand prior to the last election that made the deficit picture appear better than it was, something other elected officials have done, as some analysts note. So there is some unease with the impeachment proceedings.

On the other hand, Rousseff was head of the state-owned oil company, Petrobras, prior to being tabbed to replace Luiz Lula de Silva as president when he couldn’t run for a third term.  Petrobras was a den of corruption, and the scandal there has implicated important members of her party, including Mr. da Silva, but not her directly.

Ecuador: The death toll in last weekend’s massive earthquake stood at 577 Thursday afternoon, with many still missing.

The government is ill-equipped to deal with the disaster and President Rafael Correa proposed a series of emergency measures to pay for it, including an increase in the sales tax, a surtax on corporate profits and a special tax on wealthy people.

In addition, anybody earning more than $1,000 a month will be required to contribute one day’s salary to a reconstruction fund.

The initial estimate on reconstruction is $3 billion, but with 1,125 buildings destroyed by the government’s own estimates, let alone the costs for infrastructure, this seems way low.

Venezuela:  How poor are things here these days?  How would you like your power cut off for four hours a day?  That is what is happening in Venezuela beginning next week to deal with a worsening energy crisis.  A severe drought is limiting hydroelectric output; the latest setback to the nation’s economy which has been hammered by the collapse in the oil price, Venezuela’s main export.

The country’s main brewer, Polar, said it will stop production because it has no dollars to buy grain abroad.  10,000 workers are impacted.

Cuba: President Raul Castro opened a four-day Communist Party congress Saturday with a tough appraisal of the government’s scarce progress in implementing economic reforms, as well as a warning that Cuba must remain wary of U.S. intentions.  Castro said there was evidence the U.S. had “changed its policies, but not its objective” to subvert the regime.

“We must be alert today, more than ever,” Mr. Castro said.

Meanwhile, Fidel Castro made an appearance to say goodbye, telling everyone he would not be seen in public again.  Bye-bye.  Rot in hell.

Random Musings

--Hillary Clinton and Donald Trump rolled to victory in this week’s big enchilada, the New York primary.

NY Results:

Clinton 58%, Bernie Sanders 42%.  Clinton 139 delegates. Sanders 106.

Total delegate count (including superdelegates): Clinton 1,930; Sanders 1,189. [2,383 needed for nomination.]

Trump 60%, John Kasich 25%, Ted Cruz 14.5%. Trump 89 delegates. Kasich 4.  Cruz 0.

[A CBS News Battleground poll a day before the primary had it Trump 54, Cruz 21, Kasich 19.]

Total delegate count: Trump 845; Cruz 559; Kasich 148. [1,237 needed for nomination]

--A new Wall Street Journal/NBC News poll found Hillary Clinton with a steep decline in popularity over the past month.  Among voters in both parties, 56% hold a negative view of her and 32% hold a positive one; a 24-point gap that is almost twice as wide as in a WSJ/NBC poll last month when 51% viewed her negatively and 38% positively.

Donald Trump’s numbers were even worse.  65% of registered voters view him unfavorably and 24% favorably, a 41-point difference.

--Fox News released a poll Friday concerning the California primary, June 7.

Trump leads Cruz 49-22, Kasich at 20.  Clinton leads Sanders only 48-46.

--Dan Balz / Washington Post

“Hillary Clinton got what she needed in New York, a solid victory that stopped Bernie Sanders’ weeks-long winning streak.  But any cause for celebration among her supporters probably will be tempered by the reality that her unexpectedly difficult nomination battle has taken a significant toll on her candidacy.

“By the end of next week’s contests in Pennsylvania, Maryland, Connecticut, Rhode Island and Delaware, her lead in pledged delegates in all likelihood will be insurmountable....

“By the beginning of May, Clinton will be at liberty to turn her attention to the general election. At that point, turning around public perceptions will be crucial if she hopes not just to win the presidency but to be able to rally the country behind her agenda.

“The good news for Clinton – and Democrats will seize on this – is that, against either Donald Trump or Ted Cruz in a possible general election matchup, she looks strong.  That’s especially the case against Trump, who continues to run up negative numbers unheard of for a potential major-party nominee.  But Trumps’ problems do not diminish the fact that, standing alone, Clinton looks much weaker than recent nominees....

“The damage to Clinton from her battle with Sanders is borne out in the latest NBC News-Wall Street Journal poll. The longer this race has gone on, the more she has shown vulnerabilities.  The top-line number that caught the eyes of so many analysts shows her now in a dead heat with Sanders nationally – ahead of him by just two percentage points, 50 to 48 percent.

“Those numbers...offer a window into both the success of Sanders in generating enthusiasm and Clinton’s inability to capitalize on all her political advantages.”

Maureen Dowd / New York Times

“Hillary may be right that Bernie is building socialist castles in the sky. But Bernie is right that Hillary’s judgment has often been faulty.

“She has shown an unwillingness to be introspective and learn from her mistakes. From health care to Iraq to the email server, she only apologizes at the point of a gun. And even then, she leaves the impression that she is merely sorry to be facing criticism, not that she miscalculated in the first place.

“On the server, she told Andrea Mitchell of NBC News that she was sorry it had been ‘confusing to people and raised a lot of questions.’ She has never acknowledged, maybe even to herself, that routing diplomatic emails with classified information through a homebrew server was an outrageous, reckless and foolish thing to do, and disloyal to Obama, whose administration put in place rules for record-keeping that she flouted.

“Wouldn’t it be a relief to people if Hillary just acknowledged some mistakes? If she said that her intentions on Libya were good but that she got distracted by other global issues and took her eye off the ball? That the questions that should have been asked about Libya were not asked and knowing this now would make her a better chief executive?....

“But as usual, Clinton, who talked Obama into (toppling Qaddafi), is defiantly doubling down.  As her national security advisers told Kim Ghattas for a piece in Foreign Policy, Clinton ‘does not see the Libya intervention as a failure, but as a work in progress.’”

John Podhoretz / New York Post

“(New York’s) Democrats have brought the Bernie insurgency closer to its inevitable end.

“Here in New York, reality bit the Bernie bandwagon.  He may deliver endless lectures about how money is everything in politics, but he outspent her in New York by 2-to-1 and she still romped....

“Meanwhile, the state’s Republicans just did something for Donald Trump no other state’s GOP electorate has done for him: It gave him an outright majority of the votes in the single largest primary victory any candidate has scored thus far....

“(Cruz and Kasich) may succeed in denying Trump the 1,237 delegates needed to secure a first-ballot victory at the convention in Cleveland. But the idea Cruz can take the nomination away from Trump on the second ballot at the convention if the Texan ends this primary season with a string of defeats flies in the face of everything we know about politics and political psychology.”

--Editorial / Wall Street Journal

“Some of the ‘Never Trump’ crowd are claiming that New York changed nothing in the race, but that is wishful thinking. Mr. Trump won at least 89 of the 95 available delegates and all but one of 27 congressional districts.  (He lost the East Side of Manhattan.)....

“The blowout victory erases the memory of Mr. Trump’s defeat in Wisconsin two weeks ago and propels him into next week’s contests in five mid-Atlantic and New England states....

“Mr. Cruz would do best now to leave next week’s contests to Mr. Kasich and focus on Indiana May 3, Nebraska May 10, and California June 7.  With its winner-take-all rules, Indiana is now make-or-break for the Texan – and maybe for Mr. Trump too.  Indiana Governor Mike Pence, a stalwart conservative running for re-election this year, will have an excruciating decision to make on whether to endorse a candidate or stay neutral....

“As for Mr. Kasich, he has so far failed to catch popular fire despite the manifest weaknesses of his remaining opponents.  Connecticut, Maryland and Pennsylvania may be his last best chances, especially if Mr. Cruz stays away.  The Ohio Governor keeps stressing his political experience and electability, which are less potent in this year of the outsider candidate. We think he is most appealing when he talks more about how he’d change Washington and less about his personal virtues....

“As for Mr. Trump, his main opponent continues to be – himself.  His insults and bullying have built a loyal base of support but also a firm opposition. Even with his New York triumph, he has won only 38% of the GOP vote. His negative favorability rating – 65% in the latest WSJ/NBC poll – is unprecedented for a potential presidential nominee....

“As a major party nominee, the New Yorker would be the biggest gamble since George McGovern in 1972. He’ll have no chance in November if he can’t first convince a larger majority of Republicans that it’s not a suicide leap.”

--Following his dismal performance in New York, Ted Cruz slimed the state in Pennsylvania.

“Let me tell you what Trump and the media want to convince everyone – that Pennsylvania is a suburb of Manhattan.  Manhattan has spoken and Pennsylvania will quietly follow into obedience,” Cruz said, suggesting New York elites were telling the common folk what to do.  [Except John Kasich won Manhattan.]

Then Cruz sarcastically added, “Donald Trump won his home. Truly a remarkable achievement.”

--Prior to Tuesday’s New York primary, Donald Trump, campaigning in Buffalo, lauded New York values but mistakenly mentioned the name of convenience store chain 7-Eleven instead of 9/11.

“It’s very close to my heart because I was down there, and I watched our police and our firemen down at 7/11, down at the World Trade Center right after it came down, and I saw the greatest people I’ve ever seen in action.”

--Bernie Sanders had a brief chat with Pope Francis at the Vatican, the two discussing the need for morality in the world economy before the pontiff left for his visit to the Greek island of Lesbos.

Sanders spent the night in Rome after addressing a Vatican conference on social justice.

Sanders didn’t expect to meet the pope.  “He is a beautiful man,” Sanders said.  “I am not a Catholic, but there is a radiance that comes from him.”

--Three government workers were charged with crimes for their roles in the Flint, Mich., water crisis.  The workers – an employee of Flint and two state workers responsible for monitoring water quality – are the first to face criminal charges.

The charges included tampering with evidence contained in reports on lead levels in city water.

--According to data released Tuesday by the National Oceanic and Atmospheric Administration, last month was the hottest March in 137 years of  record keeping, the 11th consecutive month to set a new record, and it puts 2016 on course to set a third straight annual record.

The March data follows the hottest winter on record worldwide.  Other monitoring agencies such as NASA and the Japan Meteorological Agency agree that 2016 has no precedent in the modern climate record.

--Life expectancy fell for the U.S. white population in 2014 and remained flat for all population groups combined, according to data released by the Centers for Disease Control and Prevention.

A white American born in 2014 could be expected to live 78.8 years, down from 78.9 the year before.

Non-Hispanic white women live longer than men and African-Americans of both sexes in the U.S., with a life expectancy at birth of 81.1 years in 2014, according to the CDC.

Life expectancy for non-Hispanic white men, at 76.5 years, also fell last year, but by a small amount not visible due to rounding.

U.S. life expectancy overall has been stagnant at 78.8 years since 2012, remaining below that of several European countries, Canada, Australia and Japan.

The U.S. had seen a steady gain from 69.7 years overall in 1960 to 78.7 in 2010.

African-American men gained 0.4 years of life expectancy in 2014, to 72.2 years.

Research published in November showed that white middle-aged Americans – both men and women – have been dying at a rising rate since the beginning of this century, due mostly to suicide, alcohol abuse and chronic liver disease.

In 2014, increases in the number of deaths from suicide, alcohol or drug overdoses offset declines in deaths for both white men and women from cancer, heart disease and other major chronic killers, as noted by Elizabeth Arias, the author of the report.  [Betsy McKay / Wall Street Journal]

The suicide rate rose 24% between 1999 and 2014 after a decade and a half of declines, according to the CDC.

--The Treasury Department announced that Harriet Tubman, an African-American who ferried thousands of slaves to freedom on the Underground Railroad, will replace the slaveholding Andrew Jackson on the center of a new $20 note, while Alexander Hamilton, whose popularity has surged with the musical “Hamilton,” will remain on the face of the $10 bill.

Other depictions of women and civil rights leaders will also be part of new currency designs, though none of the bills, including a new $5 note, will reach circulation until the next decade.

Treasury Secretary Jacob J. Lew was excoriated for reneging on his 10-month-old commitment to put a woman on the $10, but that’s where Broadway came in.

Figure skater Peggy Fleming will not be on our currency, much to my chagrin.  Track star Alysson Felix would have been a good pick, too.

--Happy 90th Birthday to Queen Elizabeth II – Britain’s oldest and longest-serving monarch.

--Lastly, RIP Prince...simply a musical genius.

---

Pray for the men and women of our armed forces...and all the fallen.

God bless America.

---

Gold $1233
Oil $43.73

Returns for the week 4/18-4/22

Dow Jones  +0.6%  [18003]
S&P 500  +0.5%  [2091]
S&P MidCap  +0.8%
Russell 2000  +1.4%
Nasdaq  -0.7%  [4906]

Returns for the period 1/1/16-4/22/16

Dow Jones  +3.3%
S&P 500  +2.3%
S&P MidCap  +5.6%
Russell 2000  +1.0%
Nasdaq  -2.0%

Bulls 47.4
Bears  21.7  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

04/23/2016

For the week 4/18-4/22

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant costs.  Your help is appreciated.  Click on the gofundme link above or you can send a check to PO Box 990, New Providence, NJ  07974.

Edition 889

Washington and Wall Street

Next week we have a key Fed Open Market Committee meeting.  Not that the Fed is going to hike the benchmark funds rate again...it isn’t...but the accompanying statement will be parsed anew for signs of a June hike.  That said it will still depend on the May/June data leading up to that particular confab, plus any concern in euroland with Greece and the referendum on Brexit.  Also, don’t discount the impact of the June 7 Republican primary results, which will tell you whether Donald Trump has received the 1,237 he needs for the nomination or if we’re headed to a brokered convention, and the uncertainty on Wall Street and in the Fed that would engender.

There was some data on the housing front.  March housing starts were far less than expected, down 8.8%, but existing home sales rose a solid 5.1% month over month to an annualized rate of 5.33 million, better than expected.

Jobless claims for the week ended April 16 also came in at their lowest level since the 1970s, something the Fed will weigh.

This week was all about earnings and I cover individual companies below.  The tech earnings have been less than impressive thus far, while some of the industrials had slightly optimistic statements and the consumer sector was so-so at best.  All in all, kind of bleh. 

Here’s the deal.  The market is in no way cheap (24 p/e for the S&P on trailing earnings), even with zero interest rates.  But it did help some that oil prices didn’t collapse and instead rallied following the Doha weekend meeting with oil producers that I cover below.

So the Dow on Monday closed above 18000 for the first time since last July before finishing the week at 18003.  [The all-time high is 18312.]

Europe and Asia

Markit released its flash readings for April on services and manufacturing in the eurozone and the manufacturing PMI was 51.5 vs. 51.6 in March (50 being the dividing line between growth and contraction). Services were a tick better at 53.2 vs. 53.1.

The flash readings in Germany were 51.9 on the manufacturing side vs. 50.7 last month, with the services reading at 54.6, down from 55.1

In France the services PMI was 50.8 vs. 49.9, while manufacturing fell to a putrid 48.3 vs. 49.6.

Chris Williamson, Chief Economist at Markit:

“A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.

“The eurozone economy remains stuck in a slow growth rut in April, with the PMI once again signaling GDP growth of just 0.3% at the start of the second quarter, broadly in line with the meager pace of expansion seen now for a full year.

“Even more aggressive policy action may therefore be required to drive a more robust and sustainable recovery and reignite inflationary pressures.”

Related to Mr. Williamson’s statement, European Central Bank President Mario Draghi called for critics of the European Central Bank to give its stimulus room to work.

“Any time the credibility of a central bank is perceived as being put into question, the result is a delay in the achievement of its objectives – and therefore the need for more expansion,” an irritated Draghi told reporters in Frankfurt.  “Our policies work, they are effective.  Just give them time.”

The ECB’s Governing Council left the benchmark interest rate at zero this week and the deposit rate at minus 0.4 percent, while maintaining its asset purchase program at 80bn euros a month ($90 billion).  Going to a negative deposit rate as well as expanded quantitative easing was part of the ECB’s March 10 meeting.

But as Draghi has learned, not everyone believes in his policies.  German Finance Minister Wolfgang Schauble has been harsh in his criticism of the ECB, pointing to a policy that burdens savers and destroys retirement plans.  Schauble says Draghi deserves a share of the blame directly and that his policies have led to the rise of populist political parties.

Draghi counters that the ECB has been the only institution fighting recession and deflation in the currency bloc.

“With rare exceptions, monetary policy has been the only policy in the last four years to support growth.”

At the same time, European governments have been falling woefully short on the labor, political  and fiscal reform front. 

And at the end of the week, eurozone government bond yields were rising, even though Draghi insisted interest rates will remain lower for longer.  [The 10-year German Bund closed the week with a yield of 0.23% vs. 0.13% the week before, a big percentage move.]

Other tidbits....

U.K. retail sales posted their biggest monthly decline in more than two years in March, down 1.6%, ex-gasoline. 

And the negotiations over the latest Greek bailout continue, with the IMF not wishing to support the next agreement that Greece and its creditors reach, which Greek officials find hypocritical.  While the fund is owed $12 billion, it is not promising to lend any new money this year, so, Greece argues, how can the IMF push them so hard when it comes to new austerity when it isn’t willing to lend new money?  At least the ECB and EU are promising further funding as part of any deal.

But the IMF is the body seeking debt relief for Greece, which the EU, read Germany, are adamant against.

[To be clear, the third bailout was long finalized...it’s the doling out of further tranches of aid within it that is again in dispute as Greece’s financial program is constantly under review.]

Regarding migration, there was a noticeable reduction in March of migrants to Greece after the EU-Turkey deal, but the total to Italy is jumping, 24,000 in the first three months, up 85% compared with last year.  Italy is preparing to ask its EU partners for further support in coping with the new arrivals because its neighbors have been hardening their policies.  Prime Minister Matteo Renzi said the other day, “We won’t look away if someone is breaking the rules (i.e., the neighbors and not being more humanitarian, per EU ‘values’).”

Wednesday there was a deadly shipwreck that claimed some 500 lives in an accident involving smugglers and migrants crossing to Italy.

Pope Francis, prior to this latest disaster on the Mediterranean, made an emotional visit to the Greek island of Lesbos to meet with migrants and he ended up taking three families whose homes had been bombed in the Syria war back to the Vatican with him.

Separately, the European Union issued a report that member states granted asylum to more than 330,000 in 2015, half of whom were Syrians.  The 330K was an increase of 72% compared with 2014.  Of course hundreds of thousands more entered the EU and are either in legal limbo or hiding in the shadows.  It’s only now through the EU-Turkey deal that new arrivals can be automatically sent back if they don’t qualify.

On the Brexit front and the issue of Britain leaving or staying in the EU, President Obama weighed in by writing an op-ed in London’s Daily Telegraph prior to his arrival in the U.K.

Obama said Britain’s influence is enhanced by its membership in the European Union.

“The European Union doesn’t moderate British influence – it magnifies it,” Obama said.  “A strong Europe is not a threat to Britain’s global leadership; it enhances Britain’s global leadership.”

London Mayor Boris Johnson, a Conservative and a leading figure in the Leave campaign (as well as a man after David Cameron’s job), said Obama’s argument was “hypocritical” and he should not be intervening in the debate ahead of the June 23 referendum.

“For the United States to tell us in the U.K. that we must surrender control of so much of our democracy – it is a breathtaking example of the principle of do as I say but not as I do,” Johnson wrote in the Sun newspaper.  “It is incoherent.  It is inconsistent, and yes it is downright hypocritical.  The Americans would never contemplate anything like the EU, for themselves or for their neighbors in their own hemisphere.  Why should they think it right for us?”

The Vote Leave campaign said in a statement on Friday that the U.S. refusal to give up national sovereignty to international courts, and its lack of free movement of citizens from neighboring Canada and Mexico, are evidence that Obama isn’t prepared to accept measures that replicated the U.K.’s EU membership.

“President Obama, and every one of his predecessors, have ferociously protected the sovereignty of the U.S.A.,” said Iain Duncan Smith, a former Cameron cabinet minister who resigned amid the row over the referendum.  “What I do find strange is that he is asking the British people to accept a situation that he patently would not recommend to the American population.”  [Bloomberg]

U.K. Treasury chief George Osborne warned that the British economy could be around 6% smaller in 2030 if it left the EU than if it remains a member.  “Under any alternative, we’d trade less, do less business and receive less investment.”

But the likes of Boris Johnson argue the U.K. would thrive economically outside the EU because it would continue to trade with Europe – which accounts for almost half of Britain’s exports – while also being freer to negotiate trade deals with faster-growing economies without Brussels-imposed restrictions.

But what the Leave folks are failing to note is there would be chaos should Britain leave, with every deal that Britain has with the Union needing to be reworked, let alone the fact that trade deals take an inordinate amount of time to negotiate so it’s not as if Britain can just flip a switch and have everything it wants.  [Items such as visa-free travel throughout the EU for Brits would also be no sure thing.]

German Finance Minister Wolfgang Schauble warned George Osborne that Berlin would be a tough negotiator if the U.K. votes to leave.

Italy’s finance minister, Pier Carlo Padoan, told the Financial Times in an interview that “Brexit is a major threat to Europe.  It would certainly damage the U.K. in the first place, but also the rest of Europe...particularly the political consequences.”

On this last point Padoan is referring to Brexit sending “a strong message to those who don’t like Europe that Europe can be undone.”

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Turning to Asia....just a few notes on China. Normally, the National Bureau of Statistics releases quarter-over-quarter GDP figures at the same time as the yearly numbers, but this time they hid it until a few days after the latter was released, claiming they needed more time.  Here’s why it’s important.

While the year-on-year GDP figure for the first quarter was 6.7%, in line with expectations, the seasonally adjusted GDP for Q1 was just 1.1% compared with last year’s fourth quarter – the lowest quarterly rise since 2010.

So this downer comes as other data shows the Chinese economy was stabilizing during the first quarter, including positive surprises from trade, inflation, and output.  It all just speaks to the credibility issue when it comes to numbers here.

Separately, house prices in China’s leading cities surged as much as 63% last year to March while lower-tier cities saw prices tumble, further signs of a bifurcated market.

In Japan, the flash manufacturing reading for April came in at a dreadful 48.0 vs. 49.1 in March, with recent earthquakes compounding already-sluggish growth as measured by the PMI series.  The 48 is the worst figure since January 2013.  Aside from the earthquakes disrupting activity across one of the nation’s industrial heartlands, exporters are also grappling with a resurgent yen.

Both production and new orders declined markedly.

A slew of economic data next week, including on consumer spending, factory output and inflation, is likely to keep the Bank of Japan under pressure to roll out more stimulus to support the economy.

There is also renewed talk that Prime Minister Shinzo Abe will call off a sales tax hike scheduled for next year to focus on bolstering domestic demand.

Street Bytes

--The markets were actually mixed on the week, despite the Dow Jones’ 0.6% gain to close above 18000.  The S&P 500 advanced 0.5% to 2091, just 39 points shy of its record all-time high, but Nasdaq, after some high-profile earnings shortfalls, fell 0.7%. 

Another heavy week coming up, including not just the Fed but a reading on first-quarter GDP.  The Atlanta Fed’s GDPNow indicator pegs it at just 0.3%, though the Street is closer to 0.9%, while you also have earnings from the likes of Apple, Amazon and Facebook.

--U.S. Treasury Yields

6-mo. 0.36%  2-yr. 0.82%  10-yr. 1.89%  30-yr. 2.71%

The yield on the 10-year rose 14 basis points from 1.75%.

--Traders waited on Sunday’s summit of 16 oil ministers in Qatar, looking for an agreement on production levels that would further firm up prices, but when the meeting broke up Sunday evening, Qatar’s Mohammed Al Sada, speaking for the group, said: “The inclusion of all OPEC members would definitely help in reaching an agreement,” promising more consultation prior to June’s formal OPEC meeting.

Ergo, there was no deal because Iran decided on the eve of the meeting not to show, and then when the others got together, Saudi Arabia suddenly insisted every OPEC member, including Iran, must subscribe to a freeze on production.

What emerged is that the Saudis have a new face, Mohammed bin Salman, a 30-year-old deputy crown prince who’s taken control of economic policy in the kingdom and has been warning no deal was possible without Iran’s participation.  For its part, Iran, post-sanctions, insists it has the right to ramp up production to pre-sanctions levels.

The thing is, most of the big players, including Saudi Arabia and non-OPEC Russia were already producing at record levels, so a freeze at January production is hardly the actual reduction in production OPEC and Russia need.  So the message was sent: every country for itself.

Oil, as measured by West Texas Intermediate, closed last week at $40.36 and with the bad news on Sunday, it was expected the price would crater, at least a couple dollars, but following an initial brief decline Monday morning, crude took off again and closed the week at $43.73, the highest weekly close since early November.

Earlier, the International Energy Agency had said overall non-OPEC production was expected to fall by 700,000 barrels a day this year, but that was easily going to be offset by Iran, alone, which has vowed to hit 4 million barrels a day after reportedly ramping up already to 3.3mbd.  [Some dispute Iran’s ability to do so.]

Separately, Prince Mohammed bin Salman said Saudi Arabia could increase output to 11.5mbd and go to 12.5 million in six to nine months “if we wanted to.”  The country pumped 10.2mbd last month, according to data compiled by Bloomberg.

For now, prices were helped somewhat by an oil workers’ strike in Kuwait that reduced production there, and the IEA and Energy Information Administration are growing more confident there will be a significant rebalancing between supply and demand in the market later this year, again, owing in no small part to reductions in the U.S.

We need a few more weeks to shake it all out and get more real-time data.  I’ve said the last fe months that you could wake me up when we got above $40 and stayed there for a while.  It’s now been at $40 for two weeks.  I’ll define ‘a while’ as another two.  At that point I’ll decide if the true bottom is in.

--Schlumberger, the world’s largest oilfield services company, warned the decline in global drilling activity and the rate of disruption “reached unprecedented levels” in the first three months of the year as it shed 2,000 jobs in the first quarter, bringing its cuts since the collapse in crude prices began in 2014 to about 36,000 jobs.

The company said global spending reductions for the year will approach 25 percent.  The number of land rigs in the U.S. declined 31 percent.

Profits fell to $501m in Q1 from $975m in the year ago period.

--Halliburton Co. said on Friday it reduced headcount by more than 6,000 during the first quarter, with the oilfield services provider reporting revenue dropped 40%.  The deadline on its merger with Baker Hughes is April 30, but as we now know this one isn’t coming about.

--Hedge funds have suffered their worst quarter in seven years for redemptions, with more than $15bn pulled out; the total amount invested in hedge funds falling to $2.86 trillion in the first quarter, marking the first time since 2009 that the sector has faced two consecutive quarters of net outflows, according to data from Hedge Fund Research and the Financial Times.  Some high-profile funds such as Bill Ackman’s Pershing Square have had awful performance numbers and many investors, ticked at the high fee structure (many paying 2 percent for management, and then 20 percent of profits), have said enough.

--Goldman Sachs Group reported lower first quarter results, with net income falling 60% to $1.14 billion. Revenue dropped 40% to $6.34 billion from $10.62bn, shy of expectations.

Trading revenue fell 37%, while investment banking revenue dropped 23%.

The investment bank cut total expenses 29% in the quarter, which doesn’t portend whopping bonuses for Goldman traders and bankers.

--Morgan Stanley reported earnings that beat expectations, though they were down 53% from year ago levels (off 36% ex- one-off items), with revenue falling 21%.

--Tens of thousands of Wall Street bankers face tighter restrictions on how they are paid under new rules proposed by regulators; another move designed to curb excessive risk-taking at the country’s biggest financial firms.

The rules would require the biggest banks to defer payment on at least half of executives’ bonuses for four years, a year longer than what is common industry practice.  “The plan also would require a minimum period of seven years for the biggest firms to ‘claw back’ bonuses if it turns out an executive’s actions hurt the institution or if a firm has to restate financial results.”  [Wall Street Journal]

--Alphabet (Google) shares fell sharply, 5.3%, after first-quarter earnings missed Wall Street’s expectations and Google ad prices tumbled.

Sales were up 17.3 percent to $20.3bn, though ex-the costs of acquiring traffic, Alphabet sales were $16.5bn.

Net profit rose 20% to $4.2bn, but cost per click at Google’s own websites fell 12%.

CFO Ruth Porat said the shift from desktop search to mobile and programmatic advertising (such as display ads on YouTube) came with higher costs of reaching users.

Headcount increased 16% to 64,000 employees, with hiring focused on cloud and apps.

But in a sign of the times, and U.S. tax laws, of Alphabet’s $75.3bn in cash, 60% is held overseas.

--Shares in Microsoft dropped more than 7% after the software company reported lower than expected revenues and earnings for its fiscal third quarter.  The company added sales in the current quarter will be below analysts’ expectations as the transition to the cloud has also put pressure on margins.

Microsoft’s revenues were up just 2% from the same period a year ago, while profits fell slightly to $5bn on an adjusted basis.  The company expects revenues in the current quarter at the same level as the past one.

The weak PC market, which Gartner said shrank 9 percent during the first quarter, also had an impact on Microsoft sales.

--IBM delivered another miserable quarterly earnings report.  Yes, it is making solid progress in its cloud computing initiatives, but the company reported a 21% decline in net profit from continuing operations in the first three months of the year, with first-quarter revenue declining 5%.

IBM said the businesses targeted for growth and investment, like the cloud and Watson’s data initiatives, grew by 14%.  While decent, the size is nowhere sufficient to make up for the downfalls in the larger parts of the company. Systems hardware was down by 20%, for example.

Bottom line, overall revenue dropped for a 16th consecutive quarter, all with CEO Ginni Rometty at the helm.  Why is she still there?

--Johnson & Johnson reported revenue was up just 0.6 percent from a year ago in the first quarter, but this topped the Street’s expectations.  The figure would have been higher were it not for the strong dollar. Nearly half the company’s sales are from overseas.

--McDonald’s continues to rock and roll, reporting global comp sales increased 6.2% in the first quarter, though consolidated revenues decreased 1% (up 3% in constant currencies).  Earnings came in better than expected.

In the U.S., Q1 comp sales increased 5.4%, fueled by the continuing success of All Day Breakfast.  I mean this was a company that was dead in the water, with falling comp store sales growth until CEO Steve Easterbrook took over.

--Caterpillar Inc. posted lower quarterly net profit as slowing activity in global mining and construction hurt sales of machinery.  Revenue for the world’s largest heavy machinery manufacturer fell to $9.46 billion from $12.7 billion a year ago, but the company really wasn’t  that pessimistic amid signs the bottom could be in.

--Volkswagen reached a settlement with U.S. regulators over a fix for its emissions scandal.  In a court hearing in California it was announced the company agreed to buy back the affected cars and pay compensation.  The deal extends to 480,000 cars that have diesel engines.

Consumers who bought affected VW cars have three options:

Have VW buy back their vehicle; have consumer’s vehicle modified; have leases cancelled for consumers.

But the case is far from over as the company faces another series of testing deadlines as it seeks to draw a line in the U.S.

VW had already agreed to offer owners the option to have their vehicle bought back.

The full terms of the deal between VW and regulators is to be disclosed to the public on June 21.

Separately, Volkswagen AG more than doubled provisions to pay for the emissions-cheating, leading to the biggest loss in its history.  VW has now set aside $18.2 billion.  Wow.

--General Motors said revenue rose to $37.3bn during the first quarter, compared to $35.7bn from the prior year period. Earnings came in at $2bn.  A strong performance in the U.S. offset ongoing weakness in Europe and South America.

CEO Mary Barra touted robust growth in SUV and luxury segments in China, while GM is outpacing the industry in Europe.

--Ford revamped the Mustang model with foreign sales in mind and it would appear to be working, as the Mustang was the world’s best-selling sports coupe last year.

About 19,000 out of a total of 141,000 Mustangs were sold outside the U.S. last year.  16,000 were sold in Europe.  The car is made in Flat Rock, Mich.

--Mitsubishi Motors Corp. says it found evidence its employees falsified emissions test data, a la Volkswagen.

Mitsubishi also admitted falsifying fuel economy data for more than 600,000 vehicles sold in Japan, including falsifying tire pressure figures.  Executives took a deep bow and there was no applause.

--United Continental, having staved off a proxy fight, reported first-quarter net income dropped 38% from a year earlier, though excluding one-time items, the company beat the Street’s expectations.

In the settlement with two activist investors that own 7% of the shares, United agreed to immediately name two investor representatives to its board and select a third by mutual agreement within six months.

Revenue declined 4.8% to $8.2 billion and the company issued downbeat guidance in the current quarter, pointing to soft April bookings, overcapacity and the currency impact.

--Coca-Cola’s growth slowed in the first quarter, with soda volumes flat after five straight quarters of increases.  Flagship Coke declined in every region but Asia, in no small part because of health concerns over sugary drinks.

Net profit fell 4.8% and revenue dropped 4% in the first quarter from a year earlier.

Coke is doing OK with its low-margin beverage products, like water (“still-beverages”).

But wait...there’s more!  Coke is redesigning some of its products, like Diet Coke and Coke Zero, to contain some of its brand’s red coloring, plus it will be changing the names of some of its drinks to help consumers identify just what the heck they’re buying.

--PepsiCo Inc. reported year-over-year declines in revenue for the first three months, down 2.9% to $11.86 billion.  Revenue increased 3% in its Frito-Lay North America segment and 1.5% in North America Beverages, but decreased 3% at Quaker Foods North America.

Profit dropped from $1.22 billion to $931 million.

--Yum Brands, parent of KFC, Pizza Hut and Taco Bell, reported a 6% rise in first-quarter same-store sales in its China division, which compares very favorably with a 12% drop in the year ago period after a food scare tied to KFC’s supply chain.

More specifically, KFC China saw a 12% jump in same-store sales growth, owing to a Chinese New Year promotion.

Total sales worldwide for Yum were largely flat at $2.6bn, though earnings beat expectations.  The company gave solid guidance for the rest of the year.

Yum previously announced it would split off its China business.

--Netflix shares cratered after the company gave poor guidance for the current quarter.  The streaming video provider expects to add less than half as many subscribers as it did during the first quarter.

Next month, many Netflix members will see a $2 monthly increase to its most popular subscription plan, thus the outlook for many either dropping their subscriptions or it being an inhibitor for new ones.

Netflix forecast net income in the current quarter of $9 million, compared to $26 million in the same period last year.

--Starbucks said its profit rose 16% in the first quarter, but sales growth fell short of Street expectations and the company’s stock fell 5% in response.

Global comp store sales were nonetheless up a solid 6%, including 7% in the U.S., with food now accounting for 20% of sales here.

Sales were up a less than robust 3% in Asia and only 1% in the region defined as Europe, the Middle East and Africa.

--The price of iron ore has been rising, a good sign as it’s the key ingredient in steel-making so a benchmark for the global economy. At $70 a ton, it’s at a level last seen at the end of 2014; up 60% from the start of the year

Mining giants like BHP have been slashing production which only helps on the price side if demand stabilizes and then picks up.  Heretofore, there has been tremendous oversupply, led by China.  But BHP said this week it doesn’t expect the rise in prices to hold more than a few months, because more supply is set to hit the market all over again.

--Intel announced it would lay off up to 12,000 employees, or about 11% of its global workforce.  With over 112,000 workers worldwide, it’s going to be a rather sensitive subject and CFO Stacy Smith declined to say where the majority of the layoffs would occur; though it’s assumed there will be a major impact on Oregon and the Portland area, where 18,500 work.

Chandler, Arizona, is the second-largest site in the country with 11,000 employees, though California has 12,500 at two sites.

On the earnings front, Intel’s revenue rose 7% in the first three months of the year, with earnings slightly ahead of year ago levels.

--Yahoo reported revenue of $1.08 billion in the first quarter, down from $1.22bn the prior year. 

Revenue from its mobile and native advertising business grew 6.8%, but everything else essentially fell 9%.

Investors are waiting to see who will sweep in and buy the prime web site operation.

--Under Armour Inc. reported a 30% jump in revenue to $1.05 billion for its most recent quarter, owing in no small part to Stephen Curry as the company’s small footwear business logged a 64% gain in revenue.

For the quarter, the company posted a profit of $19.2 million, up from $11.7 million a year earlier, but the company’s performance still pails to that of Nike.  UA’s revenues are 1/8th of Nike’s, the latter at $8.03bn for its latest quarter.

--Editorial / Wall Street Journal

“President Obama claimed credit at a Los Angeles fundraiser last week for ‘the steady progress that happens when people who love this country decide to change it,’ and reality is unlikely to darken his farewell tour.  But for everyone else, note that the largest U.S. health insurer is quitting ObamaCare.

“On Tuesday UnitedHealth Group reported a terrific first quarter, with strong performance across nearly all business lines. There was one exception: The conglomerate’s insurance exchange unit raised its projected Affordable Care Act losses for 2016 to $650 million from $525 million, after booking $475 million in red ink last year.

“CEO Stephen Hemsley said ObamaCare’s instability, small market size and costly patient population ‘continue to suggest we cannot broadly service it on an effective and sustained basis.’

“He said UnitedHealth will withdraw to ‘only a handful of states’ in 2017....

“If UnitedHealth departs all markets, the number of U.S. counties served by three or more ObamaCare insurers will fall to 48% from 64% today, while the counties with a single insurer will rise to 24% from 7%.

“These trends could lead to even larger premium spikes than the new ObamaCare normal. This would undermine the sustainability and viability of the exchanges, as would the other alternative, which is for other insurers to start dumping unprofitable ObamaCare plans from their portfolios.  UnitedHealth spent months calling for changes to the law, which liberals dismissed as empty threats to extract regulatory concessions.  Whoops.”

--FBI Director James Comey suggested the bureau paid more than $1 million to access an iPhone belonging to one of the San Bernardino attackers. While speaking at a security forum in London, Comey said the cost of the tool was “more than I will make in the remainder of this job, which is seven years and four months, for sure.”

When you do the math, his statement implies the bureau paid at least $1.3 million to get into the phone.

“But it was, in my view, worth it,” Comey said.

--Remember how I’ve been telling you Apple would get screwed in China?  Thursday, the New York Times first reported Apple’s online movie and book stores were shut down less than seven months after being launched.  After receiving government approval, the sites were blocked last week on orders from the broadcasting regulator.

Apple said in an email to the Times that it hoped the services could resume “as soon as possible,” but offered no details.

The broadcasting regulator has been stretching its authority to online content.  I’m taking a mini-victory lap.

--I have written of Alibaba founder Jack Ma’s takeover of Hong Kong’s South China Morning Post and the SCMP interviewed him for the first time the other day on a range of topics.

Ma said China’s economy will face “a difficult three to five years” but the slowdown will be good for its long-term development.

Ma dismissed fears China would follow Japan’s stagnation path, saying China still had untapped potential.

As the SCMP wrote: “Comparing China to an ocean liner, Ma said the Chinese leadership understood that the country’s old growth model was unsustainable and that they needed to chart a new course....

“Fortunately for China, he said, the rise of its internet economy happened at the right time.

“ ‘The traditional industries are struggling, but we also see growth in domestic consumption, the services industry and the hi-tech sector, and young talents are flocking to these areas,’ he said.”

[More on this interview below on a different topic.]

--The South China Morning Post reported that Hong Kong Disneyland laid off a sizable number of workers for the first large-scale sackings since it opened in 2005.  I was there a number of years ago and told you it wasn’t that great.

Well now it has major competition from Shanghai Disney Resort, due to open in June this year and it is three times bigger.

Total visitors to the HK/Lantau-based park were down 9.3 percent to 6.8 million last year, compared with a year ago, as 23 percent fewer mainland tourists visited.

--Meanwhile, Disney reported its movie “The Jungle Book” took in $103.6 million in the U.S. and Canada its first weekend, well above the analyst projections of $80 million, making it the second-largest April opening in history.

--Uber has agreed to pay drivers in California and Massachusetts as much as $100 million to settle lawsuits in both states over whether its drivers are independent contractors or employees.

Uber drivers in the two states maintained they are employees and therefore should be reimbursed for expenses or losses incurred during the discharge of their duties.

But the settlement means that Uber can consider the drivers independent contractors moving forward, a big win as the company’s business model depends on keeping costs low by mainly serving as a conduit between drivers and riders.

--President Obama and Congress are dueling over spending for the Zika virus.  The president requested $1.9 billion, but Republicans want the money to come from unused funds in the Ebola account.

But it’s time for action.  Freakin’ reach a compromise so the states can start spraying!!!

--The Metropolitan Transportation Authority in New York said Gotham had the highest number of weekday subway ridership last year since 1948.

--Major fight at ABC as Michael Strahan, half of the “Live with Kelly and Michael” show, was plopped onto the couch at ABC’s “Good Morning America” program, as ABC/Disney execs scramble to retain their ratings lead over NBC’s “Today” show.

An industry source told the New York Post, “It’s a signal for (GMA’s) George Stephanopoulos.  This [means] get lost, we’re not paying you $10 million.”

But it’s not as if George and Michael do the same thing.  I mean I’m not about to listen to Michael Strahan go off on U.S. Syria policy.

NBC’s “Today” has been recovering from the Ann Curry debacle of 2012 and is now No. 1 in the 25-to-54 demographic.

The morning shows are cash cows.  “GMA” raked in $405.5 million in 2015, according to Kantar Media, but it’s losing its audience, which means fewer ad dollars.

But the person you’ve no doubt heard who is livid as a result of Strahan’s move is Kelly Ripa, who is staging a sickout, feeling blindsided.  But don’t cry for her.  Even after paying her $20 million a year, the show turns a profit of about $30 million, a source told The Post.

Possible replacements for Strahan include Neil Patrick Harris and CNN’s Don Lemon.

However, now there is word the show could be discontinued.  ABC execs are afraid Kelly would go rogue on live TV come her scheduled return on Tuesday.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey/Iran: The White House expressed concern Thursday about Russia moving equipment into Syria, as the ceasefire is in serious jeopardy.  President Obama said if it fails, “none of the options are good.”

While in Saudi Arabia for a security conference, Obama said, “The problem with any Plan B that does not involve a political settlement is that it means more fighting, potentially for years.  Whoever comes out on top will be standing on top of a country that’s been devastated and that will then take years to rebuild.”

Syria already is practically beyond repair, Mr. President.  It will take decades, not “years” to rebuild, assuming the conflict ended today and that’s not going to be the case.  You have only yourself to blame.

Indirect peace talks in Geneva are in total disarray as the opposition has threatened to abandon negotiations following a series of attacks.

Assad Zoubi, chief negotiator of the Syrian opposition’s High Negotiations Committee, said that for the talks to go on, Syrian President Bashar Assad must release thousands of political prisoners and “stop the massacres he is committing every day,” as reported by Reuters.

More than 50 were killed in a Syrian airstrike on a market in the town of Ma’arat an-Numan on Tuesday, a town that held regular protests against Assad and the al-Qaeda linked Al-Nusra, said Gareth Bayley, Britain’s Syria envoy.

“For the Syrian people to continue to trust this process, the cessation of hostilities (partial cease-fire) must be respected – that means an end to all targeting of civilians,” Bayley said Thursday.

The Syrian government called the opposition’s freeze on taking part “absurd theater.”  What bastards.

Syrian regime forces, with Russian artillery, have been amassing troops around Aleppo.

Russia had said it was withdrawing some of its military aircraft from Syria, but there has been no letup in Russian airstrikes while more Russian heavy weaponry has arrived in the country since March.

Separately, the UN has been evacuating hundreds of people from besieged Syrian towns in a rare sign of humanitarian progress.  But more than four million in Syria live such towns or hard-to-reach areas, with limited or no access to food or medical supplies.

Also, the U.S. Air Force deployed a B-52 bomber against ISIS, the first time the B-52 has been used in combat since 1991.

But ISIS made gains in northern Syria in Aleppo province, bordering Turkey, with its many supply lines.

ISIS was also fighting with other extremists, including Nusra Front, in a Palestinian refugee camp in Damascus, the Yarmouk camp, where 10,000 civilians “are facing starvation,” according to a UN spokesman.

Finally, Iran has deployed the regular army in its first overseas operation since the 1979 Revolution to bolster Assad.  Heretofore, Iran has been deploying the elite Revolutionary Guards.  Iran is intent on keeping Assad in power and is boosting its military presence in Syria in an attempt to influence any rift between Assad and Vladimir Putin.

Iranian leaders believe Putin could side with Washington to remove Assad.

Editorial / Washington Post

“The Syrian cease-fire has achieved diplomatic zombie status: It is dead but lives on in the otherworldly rhetoric of its promoters, headed by the Obama administration.  Heavy fighting has resumed in several parts of the country, including south of Aleppo, in the coastal province of Latakia and in the suburbs of Damascus.  Humanitarian aid deliveries have virtually ceased.  Airstrikes killed dozens of civilians in two rebel-held towns in Idlib province on Tuesday.  In Geneva, the head of the opposition’s delegation said it would not return to UN-sponsored peace talks until the government stopped its attacks and allowed aid convoys to enter besieged areas.

“The U.S. response to this renewed carnage has been to point out, weakly, that not every part of Syria has returned to all-out war.  ‘More Syrian people are living better lives as a result of the cessation than they were before,’ State Department spokesman John Kirby declared Monday. Unfortunately, such rhetoric appears to be all the United States has to offer.  Since President Obama refuses to take steps such as creating a safe zone for refugees or stepping up aid to the rebels, the United States lacks leverage over the regime of Bashar al-Assad and its Russian and Iranian allies....

“The White House reported Monday that Mr. Obama had spoken to Mr. Putin by telephone about the unraveling cease-fire.  A statement suggested he covered all the bases, including ‘the importance of pressing the Syrian regime to halt its offensive attacks against the opposition,’ the urgency of humanitarian access and the need for progress toward a political solution. But there was no indication that Mr. Putin was given any incentive to respond cooperatively, other than an appeal to his goodwill.  If that’s the case, the cease-fire will remain a zombie.”

As for Iraq, if you are looking for the battle of Mosul, the Kurds are saying there are not adequate numbers of forces, let alone funding and political leadership and a vision for what happens the day after.

Jackson Diehl / Washington Post

“All this points to a stark bottom line: There will be no liberation of Mosul in 2016. The Islamic State will outlive the U.S. administration whose lapses in Syria and Iraq helped to create it.  It will be the ugliest piece of Barack Obama’s legacy.”

Saudi Arabia: in his last trip to the kingdom, President Obama met with Saudi King Salman to seek joint action on the threats posed by Iran and Islamic State, even as most of the Gulf Arab monarchies in the region have been exasperated by the Obama presidency, and the U.S. pullback from the region, which has allowed Iran to fill the void.

The mood wasn’t helped by Obama’s recent remarks in an interview for The Atlantic where he commented on the “complicated” nature of the U.S.-Saudi relationship, describing some Gulf and European states as “free riders” who rely on the U.S. to do their dirty work.

Obama has been encouraging Gulf states to arrive at a “cold peace” with Iran to douse sectarian tensions and allow all sides to instead focus on Islamic State.

As to the bill in the U.S. Congress that, if passed, could hold the kingdom responsible for any role in al-Qaeda’s September 11, 2001 attacks, there was no official word on whether this had been discussed between Obama and Salman but one assumes it was a major topic.  Members on both sides of the political aisle in Washington are beginning to have misgivings because it can open up the U.S. to suits from citizens of other countries.

As for the 28 sealed pages of the 9/11 Commission Report – the section that details the Saudi role in the attacks, those should be released.  9/11 Commission chairman, Tom Kean, said the pages should be made public. Vice Chairman Lee Hamilton says he’s “embarrassed” it hasn’t happened already. Both Barack Obama and George W. Bush refused to declassify them.

But there have been leaks and, as the New York Post opined:

“As early as 2003, a U.S. official who’d read the pages told the Los Angeles Times they linked ‘direct involvement of senior Saudi government officials in a coordinated and methodical way directly’ to the terrorists.

“And on Wednesday, it emerged that back in 2002 investigators found a certificate for an al-Qaeda bombmaker showing he’d taken flight lessons with 9/11 attackers.  The evidence was in an envelope obtained from the Saudi Embassy in Washington....

“Riyadh actively funded al Qaeda and other Islamist extremists for decades – officially Washington shied away, for fear disclosure would threaten the U.S.-Saudi relationship.

“It’s now nearly 15 years since 9/11.  The American people finally deserve to learn the full, unvarnished and ugly truth.”

On a different matter, on Wednesday, Iran’s Supreme Leader Ayatollah Ali Khamenei attacked Riyadh’s attempts to isolate Hizbullah, Iran’s ally in Lebanon (and Syria).

“Hizbullah is shining in the Muslim world.  It doesn’t matter if a corrupt, dependent and hollow government with the use of petrodollars condemns it in a statement.  To hell with it,” Khamanei wrote in a series of tweets.

Editorial / Wall Street Journal

“President Obama arrives in Riyadh Wednesday to meet leaders of the Gulf Cooperation Council, and if he senses a chill it won’t be the air conditioning.  America’s traditional Arab allies fell betrayed by the President, and it’s not clear he wants to dispel the impression.

“This has been obvious since Mr. Obama anticipated Donald Trump by dismissing U.S. allies as ‘free riders’ in a recent interview with Jeffrey Goldberg.  The President said the Saudis need to learn to ‘share the neighborhood’ with archenemy Iran and he cast doubt on the value of the Saudi alliance.  ‘He is clearly irritated that foreign-policy orthodoxy compels him to treat Saudi Arabia as an ally,’ Mr. Goldberg wrote.

“Riyadh hasn’t been shy about voicing its dismay about Mr. Obama’s nuclear deal with Iran or his failure to enforce the chemical red line against the Assad regime in Syria.  Turki al-Faisal, the former Saudi ambassador to the U.S., has said the Administration’s Syria policy ‘would be funny if it were not so blatantly perfidious.’

“It won’t burnish Mr. Obama’s legacy to leave his successor a Middle East of emboldened enemies and distrustful allies.  The U.S.-Saudi alliance is nobody’s idea of a marriage of like minds, much less of moral values.  But Washington has a vital interest in making sure the oil-rich kingdom doesn’t become another failed Arab state, or an aggressive freelancer pursuing interests at odds with America’s.”

Israel: Prime Minister Benjamin Netanyahu headed to Moscow looking for a commitment that Russia’s reduction of its forces in Syria won’t let Iranian-backed Hizbullah strengthen their forces on Israel’s northern frontier.

The two sides then agreed that their defense ministers needed to coordinate their actions, as Israel “preserves the freedom of action of the IDF and the air force in areas that are important for our security. And I think that has been achieved,” Netanyahu said after his meeting with Putin.

Earlier, Netanyahu declared that Israel will never give up the strategic Golan Heights, captured from Syria almost 50 years ago.

Netanyahu is intent on preventing shipments of advanced weapons to Lebanon through Syria.

Afghanistan: A suicide attacker detonated a massive car bomb in the center of Kabul, after which gunmen stormed the area, and the last death toll I saw was 68 dead, mostly civilians, with over 300 injured.

This comes a week after the Taliban said it was launching its “spring offensive,” warning of large-scale attacks.

Tuesday’s bombing happened in a busy neighborhood where homes, mosques and schools are nestled close to the Ministry of Defense and other government compounds.  The blast was so powerful it shattered windows a mile away.  The presidential palace was only a few hundred meters away from the carnage.

North Korea: Satellite images show that Pyongyang may have resumed tunnel excavation at its main nuclear test site, according to a U.S. North Korea monitoring website, 39 North, run by Johns Hopkins University’s School of Advanced International Studies.  Such activity could easily be preparation for a nuclear test, as was the case in January.

Some analysts believe Kim Jong Un will order the test before a ruling party congress in early May, especially after the embarrassing failure of an intermediate-range missile test last week.

China: President Xi Jinping added a new military leadership post – commander-in-chief of a new joint-battle-command center – as part of China’s ongoing restructuring of its armed forces.

Congratulations, President Xi!  He is also titular head of the People’s Liberation Army, or PLA, and the only civilian on the party’s 12-man commission that oversees the military.

Back to Jack Ma and his interview with the South China Morning Post newspaper in Hong Kong, in talking about his vision for the publication that is one of the best in the world, Ma said:

“I believe the most important thing for the media is to be objective, fair and balanced. We should not report a story with preconceptions or prejudice,” he said.

“Sometimes people look at things purely from a Western or an Eastern perspective – that is one-sided. What the Post can do is to understand the big ‘why’ behind a story and its cultural context.

“I want to stress the importance of being fair to our readers.  You should not impose your own view and prejudice on the readers and try to lead them to a conclusion. As a reader, I understand what a fair report is.”

Ma wants to transform the Post into a global media agency with the help of Alibaba’s technology and resources.

Ma also reiterated his promise that Alibaba’s management would not take part in the Post’s newsroom operations, but he named executive vice-chairman Joe Tsai as chairman of the paper and I don’t trust him.  Yes, he’s Taiwan born and Yale educated, but many of his comments have been as if he is controlled by Beijing. 

Separately, as part of China’s continuing crackdown on the internet, a hugely popular online personality, Papi Jiang, who had rocketed to fame with her series of humorous videos offering irreverent observations on everyday life, had her videos taken offline, due to her use of “coarse language,” following “reports from the public and evaluations by experts,” according to the government’s media regulator. The woman can upload her videos again when the coarse language has been removed and unspecified “regulations” adhered to.

Papi Jiang has close to 11 million followers on Weibo.  She vowed to “pay even more attention to my words and my image” in a Weibo post Monday night.  Pathetic.  [South China Morning Post]

Russia:  Moscow and the NATO alliance met in Brussels on Wednesday after a two-year breakoff in talks as they try to re-open lines of communication.  But after talks lasted longer than expected, there were no breakthroughs.

The core issue continues to be Ukraine.  Moscow claims it intervened to defend Russian speakers in Crimea and eastern Ukraine in what was effectively a civil war.  NATO rejects these assertions, insisting Russia is waging a proxy war.

But the Kremlin got what it wanted with the meeting...the perception that the West came knocking at the Kremlin’s door for re-engagement.

Separately, Poland’s Foreign Minister Witold Waszczykowski described Russia as a bigger global threat than ISIS. Speaking at a security forum in Slovakia’s capital of Bratislava, the foreign minister said:

“We have existential threats and non-existential threats. There are non-existential threats, such as terrorists, or the massive wave of migrants.  Russia’s actions are a kind of existential threat, because they can destroy countries.”

Waszczykowski has urged NATO to approve the deployment of troops on the alliance’s eastern borders.  [Irish Independent]

Chad/Nigeria: American military officials say that ISIS and Boko Haram have begun to collaborate more closely, raising the alarm that American allies in North and Central Africa are in the crosshairs more than ever.

U.S. officials recently discovered a weapons convoy believed to be from ISIS in Libya that was headed for the Lake Chad region.

But the relationship between the U.S. and Chad is a tense one as dozens of Chadian soldiers who had voted for opposition candidates in recent elections reportedly disappeared.  Chad is run by President Idriss Deby, who will soon begin his fifth term in office, having seized power in a coup and governing ever since with an iron fist for 26 years.

U.S. ambassador to the United Nations, Samantha Power, was in Chad this week and she pressed him on the disappearances.  Deby denied this was the case.

Deby has been a stalwart, it seems, thus far in the fight against Boko Haram and now ISIS.  But can he be trusted?  Nope.

Brazil: President Dilma Rousseff vowed to defend her presidency in the face of the vote by the lower house of Congress on Sunday to proceed with impeachment proceedings against her.  The 367-137 margin was comfortably above the 342 needed to move on.

Rousseff told reporters the next day the vote “was an immense violence against truth, democracy and the rule of law.”

The process moves on to the Senate, where a political trial is expected to get under way by mid-May.

Rousseff’s approval rating has plunged to around 10%, though only 61% support impeachment. 

And she’s not really charged with corruption, rather using budgetary sleight of hand prior to the last election that made the deficit picture appear better than it was, something other elected officials have done, as some analysts note. So there is some unease with the impeachment proceedings.

On the other hand, Rousseff was head of the state-owned oil company, Petrobras, prior to being tabbed to replace Luiz Lula de Silva as president when he couldn’t run for a third term.  Petrobras was a den of corruption, and the scandal there has implicated important members of her party, including Mr. da Silva, but not her directly.

Ecuador: The death toll in last weekend’s massive earthquake stood at 577 Thursday afternoon, with many still missing.

The government is ill-equipped to deal with the disaster and President Rafael Correa proposed a series of emergency measures to pay for it, including an increase in the sales tax, a surtax on corporate profits and a special tax on wealthy people.

In addition, anybody earning more than $1,000 a month will be required to contribute one day’s salary to a reconstruction fund.

The initial estimate on reconstruction is $3 billion, but with 1,125 buildings destroyed by the government’s own estimates, let alone the costs for infrastructure, this seems way low.

Venezuela:  How poor are things here these days?  How would you like your power cut off for four hours a day?  That is what is happening in Venezuela beginning next week to deal with a worsening energy crisis.  A severe drought is limiting hydroelectric output; the latest setback to the nation’s economy which has been hammered by the collapse in the oil price, Venezuela’s main export.

The country’s main brewer, Polar, said it will stop production because it has no dollars to buy grain abroad.  10,000 workers are impacted.

Cuba: President Raul Castro opened a four-day Communist Party congress Saturday with a tough appraisal of the government’s scarce progress in implementing economic reforms, as well as a warning that Cuba must remain wary of U.S. intentions.  Castro said there was evidence the U.S. had “changed its policies, but not its objective” to subvert the regime.

“We must be alert today, more than ever,” Mr. Castro said.

Meanwhile, Fidel Castro made an appearance to say goodbye, telling everyone he would not be seen in public again.  Bye-bye.  Rot in hell.

Random Musings

--Hillary Clinton and Donald Trump rolled to victory in this week’s big enchilada, the New York primary.

NY Results:

Clinton 58%, Bernie Sanders 42%.  Clinton 139 delegates. Sanders 106.

Total delegate count (including superdelegates): Clinton 1,930; Sanders 1,189. [2,383 needed for nomination.]

Trump 60%, John Kasich 25%, Ted Cruz 14.5%. Trump 89 delegates. Kasich 4.  Cruz 0.

[A CBS News Battleground poll a day before the primary had it Trump 54, Cruz 21, Kasich 19.]

Total delegate count: Trump 845; Cruz 559; Kasich 148. [1,237 needed for nomination]

--A new Wall Street Journal/NBC News poll found Hillary Clinton with a steep decline in popularity over the past month.  Among voters in both parties, 56% hold a negative view of her and 32% hold a positive one; a 24-point gap that is almost twice as wide as in a WSJ/NBC poll last month when 51% viewed her negatively and 38% positively.

Donald Trump’s numbers were even worse.  65% of registered voters view him unfavorably and 24% favorably, a 41-point difference.

--Fox News released a poll Friday concerning the California primary, June 7.

Trump leads Cruz 49-22, Kasich at 20.  Clinton leads Sanders only 48-46.

--Dan Balz / Washington Post

“Hillary Clinton got what she needed in New York, a solid victory that stopped Bernie Sanders’ weeks-long winning streak.  But any cause for celebration among her supporters probably will be tempered by the reality that her unexpectedly difficult nomination battle has taken a significant toll on her candidacy.

“By the end of next week’s contests in Pennsylvania, Maryland, Connecticut, Rhode Island and Delaware, her lead in pledged delegates in all likelihood will be insurmountable....

“By the beginning of May, Clinton will be at liberty to turn her attention to the general election. At that point, turning around public perceptions will be crucial if she hopes not just to win the presidency but to be able to rally the country behind her agenda.

“The good news for Clinton – and Democrats will seize on this – is that, against either Donald Trump or Ted Cruz in a possible general election matchup, she looks strong.  That’s especially the case against Trump, who continues to run up negative numbers unheard of for a potential major-party nominee.  But Trumps’ problems do not diminish the fact that, standing alone, Clinton looks much weaker than recent nominees....

“The damage to Clinton from her battle with Sanders is borne out in the latest NBC News-Wall Street Journal poll. The longer this race has gone on, the more she has shown vulnerabilities.  The top-line number that caught the eyes of so many analysts shows her now in a dead heat with Sanders nationally – ahead of him by just two percentage points, 50 to 48 percent.

“Those numbers...offer a window into both the success of Sanders in generating enthusiasm and Clinton’s inability to capitalize on all her political advantages.”

Maureen Dowd / New York Times

“Hillary may be right that Bernie is building socialist castles in the sky. But Bernie is right that Hillary’s judgment has often been faulty.

“She has shown an unwillingness to be introspective and learn from her mistakes. From health care to Iraq to the email server, she only apologizes at the point of a gun. And even then, she leaves the impression that she is merely sorry to be facing criticism, not that she miscalculated in the first place.

“On the server, she told Andrea Mitchell of NBC News that she was sorry it had been ‘confusing to people and raised a lot of questions.’ She has never acknowledged, maybe even to herself, that routing diplomatic emails with classified information through a homebrew server was an outrageous, reckless and foolish thing to do, and disloyal to Obama, whose administration put in place rules for record-keeping that she flouted.

“Wouldn’t it be a relief to people if Hillary just acknowledged some mistakes? If she said that her intentions on Libya were good but that she got distracted by other global issues and took her eye off the ball? That the questions that should have been asked about Libya were not asked and knowing this now would make her a better chief executive?....

“But as usual, Clinton, who talked Obama into (toppling Qaddafi), is defiantly doubling down.  As her national security advisers told Kim Ghattas for a piece in Foreign Policy, Clinton ‘does not see the Libya intervention as a failure, but as a work in progress.’”

John Podhoretz / New York Post

“(New York’s) Democrats have brought the Bernie insurgency closer to its inevitable end.

“Here in New York, reality bit the Bernie bandwagon.  He may deliver endless lectures about how money is everything in politics, but he outspent her in New York by 2-to-1 and she still romped....

“Meanwhile, the state’s Republicans just did something for Donald Trump no other state’s GOP electorate has done for him: It gave him an outright majority of the votes in the single largest primary victory any candidate has scored thus far....

“(Cruz and Kasich) may succeed in denying Trump the 1,237 delegates needed to secure a first-ballot victory at the convention in Cleveland. But the idea Cruz can take the nomination away from Trump on the second ballot at the convention if the Texan ends this primary season with a string of defeats flies in the face of everything we know about politics and political psychology.”

--Editorial / Wall Street Journal

“Some of the ‘Never Trump’ crowd are claiming that New York changed nothing in the race, but that is wishful thinking. Mr. Trump won at least 89 of the 95 available delegates and all but one of 27 congressional districts.  (He lost the East Side of Manhattan.)....

“The blowout victory erases the memory of Mr. Trump’s defeat in Wisconsin two weeks ago and propels him into next week’s contests in five mid-Atlantic and New England states....

“Mr. Cruz would do best now to leave next week’s contests to Mr. Kasich and focus on Indiana May 3, Nebraska May 10, and California June 7.  With its winner-take-all rules, Indiana is now make-or-break for the Texan – and maybe for Mr. Trump too.  Indiana Governor Mike Pence, a stalwart conservative running for re-election this year, will have an excruciating decision to make on whether to endorse a candidate or stay neutral....

“As for Mr. Kasich, he has so far failed to catch popular fire despite the manifest weaknesses of his remaining opponents.  Connecticut, Maryland and Pennsylvania may be his last best chances, especially if Mr. Cruz stays away.  The Ohio Governor keeps stressing his political experience and electability, which are less potent in this year of the outsider candidate. We think he is most appealing when he talks more about how he’d change Washington and less about his personal virtues....

“As for Mr. Trump, his main opponent continues to be – himself.  His insults and bullying have built a loyal base of support but also a firm opposition. Even with his New York triumph, he has won only 38% of the GOP vote. His negative favorability rating – 65% in the latest WSJ/NBC poll – is unprecedented for a potential presidential nominee....

“As a major party nominee, the New Yorker would be the biggest gamble since George McGovern in 1972. He’ll have no chance in November if he can’t first convince a larger majority of Republicans that it’s not a suicide leap.”

--Following his dismal performance in New York, Ted Cruz slimed the state in Pennsylvania.

“Let me tell you what Trump and the media want to convince everyone – that Pennsylvania is a suburb of Manhattan.  Manhattan has spoken and Pennsylvania will quietly follow into obedience,” Cruz said, suggesting New York elites were telling the common folk what to do.  [Except John Kasich won Manhattan.]

Then Cruz sarcastically added, “Donald Trump won his home. Truly a remarkable achievement.”

--Prior to Tuesday’s New York primary, Donald Trump, campaigning in Buffalo, lauded New York values but mistakenly mentioned the name of convenience store chain 7-Eleven instead of 9/11.

“It’s very close to my heart because I was down there, and I watched our police and our firemen down at 7/11, down at the World Trade Center right after it came down, and I saw the greatest people I’ve ever seen in action.”

--Bernie Sanders had a brief chat with Pope Francis at the Vatican, the two discussing the need for morality in the world economy before the pontiff left for his visit to the Greek island of Lesbos.

Sanders spent the night in Rome after addressing a Vatican conference on social justice.

Sanders didn’t expect to meet the pope.  “He is a beautiful man,” Sanders said.  “I am not a Catholic, but there is a radiance that comes from him.”

--Three government workers were charged with crimes for their roles in the Flint, Mich., water crisis.  The workers – an employee of Flint and two state workers responsible for monitoring water quality – are the first to face criminal charges.

The charges included tampering with evidence contained in reports on lead levels in city water.

--According to data released Tuesday by the National Oceanic and Atmospheric Administration, last month was the hottest March in 137 years of  record keeping, the 11th consecutive month to set a new record, and it puts 2016 on course to set a third straight annual record.

The March data follows the hottest winter on record worldwide.  Other monitoring agencies such as NASA and the Japan Meteorological Agency agree that 2016 has no precedent in the modern climate record.

--Life expectancy fell for the U.S. white population in 2014 and remained flat for all population groups combined, according to data released by the Centers for Disease Control and Prevention.

A white American born in 2014 could be expected to live 78.8 years, down from 78.9 the year before.

Non-Hispanic white women live longer than men and African-Americans of both sexes in the U.S., with a life expectancy at birth of 81.1 years in 2014, according to the CDC.

Life expectancy for non-Hispanic white men, at 76.5 years, also fell last year, but by a small amount not visible due to rounding.

U.S. life expectancy overall has been stagnant at 78.8 years since 2012, remaining below that of several European countries, Canada, Australia and Japan.

The U.S. had seen a steady gain from 69.7 years overall in 1960 to 78.7 in 2010.

African-American men gained 0.4 years of life expectancy in 2014, to 72.2 years.

Research published in November showed that white middle-aged Americans – both men and women – have been dying at a rising rate since the beginning of this century, due mostly to suicide, alcohol abuse and chronic liver disease.

In 2014, increases in the number of deaths from suicide, alcohol or drug overdoses offset declines in deaths for both white men and women from cancer, heart disease and other major chronic killers, as noted by Elizabeth Arias, the author of the report.  [Betsy McKay / Wall Street Journal]

The suicide rate rose 24% between 1999 and 2014 after a decade and a half of declines, according to the CDC.

--The Treasury Department announced that Harriet Tubman, an African-American who ferried thousands of slaves to freedom on the Underground Railroad, will replace the slaveholding Andrew Jackson on the center of a new $20 note, while Alexander Hamilton, whose popularity has surged with the musical “Hamilton,” will remain on the face of the $10 bill.

Other depictions of women and civil rights leaders will also be part of new currency designs, though none of the bills, including a new $5 note, will reach circulation until the next decade.

Treasury Secretary Jacob J. Lew was excoriated for reneging on his 10-month-old commitment to put a woman on the $10, but that’s where Broadway came in.

Figure skater Peggy Fleming will not be on our currency, much to my chagrin.  Track star Alysson Felix would have been a good pick, too.

--Happy 90th Birthday to Queen Elizabeth II – Britain’s oldest and longest-serving monarch.

--Lastly, RIP Prince...simply a musical genius.

---

Pray for the men and women of our armed forces...and all the fallen.

God bless America.

---

Gold $1233
Oil $43.73

Returns for the week 4/18-4/22

Dow Jones  +0.6%  [18003]
S&P 500  +0.5%  [2091]
S&P MidCap  +0.8%
Russell 2000  +1.4%
Nasdaq  -0.7%  [4906]

Returns for the period 1/1/16-4/22/16

Dow Jones  +3.3%
S&P 500  +2.3%
S&P MidCap  +5.6%
Russell 2000  +1.0%
Nasdaq  -2.0%

Bulls 47.4
Bears  21.7  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore